UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
  Washington,
D.C.  20549
  Form
10-K
  ýANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  For the
fiscal year ended December 31,
2008
   ̈TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  For the
transition period from  to  _______.
  Commission
file number:  000-49725
 Constitution Mining
Corp.
 (Exact
name of registrant as specified in its charter)
  Nevada
                    
                    88-0455809(State
      or other jurisdiction of incorporation or organization)
                    
                    (I.R.S.
      Employer Identification No.)Manuela Sáenz 323, Suite 706, Buenos Aires,
      Argentina C1107BPA(Address
      of principal executive
      offices)                           
          (Zip Code)Registrant’s
      telephone, including area code:    +54-11-5236-9978
  Securities
registered under Section 12(b) of the Exchange
Act:  None.
 Securities
registered under Section 12(g) of the Exchange Act:
  Common Stock, $0.001 par
    value
                  Not Applicable(Title
      of class)
                  (Name
      of each exchange on which
registered)
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes   ̈  No ý
  Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes   ̈  No ý
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.  Yes  ý  No  ̈
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not contained herein, and will be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   ý
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large
accelerated filer  ̈                                                                                                   Accelerated
filer  ̈
 Non-accelerated
filer    ̈ (Do not check if a
smaller reporting
company)                 Smaller
reporting company ý
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes   ̈  No ý
  As of
June 30, 2008, the aggregate market value of the Company’s common equity held by
non-affiliates computed by reference to the closing price ($1.09)
was:   $59,516,132
  The
number of shares of our common stock outstanding as of February 28, 2009
was:   58,469,456
  Documents
Incorporated by Reference:  Parts of our definitive proxy statement to
be prepared and filed with the Securities and Exchange Commission not later than
120 days after December 31, 2008 are incorporated by reference into Part III of
this Form 10-K.
 Table of Contents
  FORM
10-K
 CONSTITUTION
MINING CORP.
 DECEMBER
31, 2008
  
  Table of Contents
  PART I
              PageItem
      1.         Business.
              4Item
      1A.      Risk
      Factors.
              17Item
      1B.      Unresolved Staff
      Comments.
              25Item
      2.         Properties.
              25Item
      3.         Legal
      Proceedings.
              41Item
      4.         Submission of Matters to a Vote of Security
      Holders.
              41PART IIItem
      5.         Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities.
              42Item
      6.         Selected Financial Data.
              43Item
      7.         Management’s Discussion and Analysis of Financial Condition and
      Results ofOperations.
              44Item
      7A.      Quantitative and
      Qualitative Disclosures About Market Risk.
              49Item
      8.         Financial Statements and Supplementary Data.
              49Item
      9.         Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure.
              49Item
      9A.      Controls and
      Procedures.
              50Item
      9B.       Other
      Information.
              51PART IIItem
      10.        Directors, Executive Officers and Corporate
      Governance.
              51Item
      11.        Executive
      Compensation.
              51Item
      12.        Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
              51Item
      13.        Certain
      Relationships and Related Transactions, and Director
      Independence.
              51Item
      14.        Principal
      Accounting Fees and Services.
              51PART IVItem
      15.       Exhibits,
      Financial Statement Schedules.
              52Signature PageExhibit Index
   
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 Table of Contents
 Note
Regarding Forward Looking Statements
  This
annual report contains forward-looking statements as that term is defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended.  In some cases,
you can identify forward-looking statements by terminology such as "may,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue," "intends," and other variations of these
words or comparable words.  In addition, any statements that refer to
expectations, projections or other characterizations of events, circumstances or
trends and that do not relate to historical matters are forward-looking
statements.  These forward-looking statements are based largely on our
expectations or forecasts of future events, can be affected by inaccurate
assumptions, and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond our control.  Therefore,
actual results could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place undue
reliance on such forward-looking statements.  These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” that may
cause our or our industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
  Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.  You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
report.  Except as required by law, we do not undertake to update or
revise any of the forward-looking statements to conform these statements to
actual results, whether as a result of new information, future events or
otherwise.
  As used
in this annual report, “Constitution Mining,” the “Company,” “we,” “us,” or
“our” refer to Constitution Mining Corp., unless otherwise
indicated.
   - 3
-
 Table of Contents
  PART
I
  ITEM 1. Business.
  Corporate
History
 
 We were
incorporated in the state of Nevada under the name Crafty Admiral Enterprises,
Ltd. on March 6, 2000.  Our original business plan was to sell classic
auto parts to classic auto owners all over the world through an Internet
site/online store; however, we were unsuccessful in implementing the online
store and were unable to afford the cost of purchasing, warehousing and shipping
the initial inventory required to get the business started.  As a
result, we ceased operations in approximately July 2002.
 
 During
our fiscal year ended December 31, 2006, we reorganized our operations to pursue
the exploration, development, acquisition and operation of oil and gas
properties.  On June 27, 2006, we acquired a leasehold interest in a
mineral, oil and gas property located in St. Francis County, Arkansas for a cash
payment of $642,006, pursuant to an oil and gas agreement we entered into on
April 29, 2006 (the “Tombaugh Lease”).  Shortly after acquiring the
Tombaugh Lease, we suspended our exploration efforts on the property covered by
the Tombaugh Lease in order to pursue business opportunities developing nickel
deposits in Finland, Norway and Western Russia.  On January 18, 2008,
we assigned all of our right, title and interest in and to the Tombaugh Lease to
Fayetteville Oil and Gas, Inc., which agreed to assume all of our outstanding
payment obligations on the Tombaugh Lease as consideration for the
assignment.  On March 9, 2007, we changed our name to better reflect
our business to “Nordic Nickel Ltd.” pursuant to a parent/subsidiary merger with
our wholly-owned non-operating subsidiary, Nordic Nickel Ltd., which was
established for the purpose of giving effect to this name change.  We
were not successful pursuing business opportunities developing nickel deposits
in Finland, Norway and Western Russia and again sought to reorganize our
operations in November 2007.
 
 In
November 2007, we reorganized our operations and changed our name to
“Constitution Mining Corp.” to better reflect our current focus which is the
acquisition, exploration, and potential development of mining
properties.  Since November 2007, we entered into agreements to secure
options to acquire the mineral and mining rights underlying properties located
in the Salta and Mendoza provinces of Argentina and in
Peru.
 
 Our common stock is quoted on the OTC
Bulletin Board  under the symbol “CMIN.”  We conduct our
business from Manuela Sáenz 323, Suite 706, (C1107BPA) Buenos Aires,
Argentina.  Our telephone number
is  +54-11-5236-9978.
 
 Exploration
Stage Company
 
 We are
considered an exploration or exploratory stage company because we are involved
in the examination and investigation of land that we believe may contain
valuable minerals, for the purpose of discovering the presence of ore, if any,
and its extent. There is no assurance that a commercially viable mineral deposit
exists on the properties underlying our mineral property interests, and a great
deal of further exploration will be required before a final evaluation as to the
economic and legal feasibility for our future exploration is determined. We have
no known reserves of any type of mineral. To date, we have not discovered an
economically viable mineral deposit on the property underlying our mineral
property interests, and there is no assurance that we will discover
one.  If we cannot acquire or locate mineral deposits, or if it is not
economical to recover any mineral deposits that we do find, our business and
operations will be materially and adversely affected.
 
 Surplus
Strategy
  Our
current business plan calls for investing any surplus operating capital
resulting from retained earnings into bullion accounts and does not include
holding retained earnings, if any, in cash or cash equivalents.  In
the event that commercially exploitable reserves of minerals exist on any of our
property interests and we are able to make a profit, our business plan is to
sell enough mineral reserves to satisfy all of our expenses and invest all
retained mineral reserves in bullion accounts established in Zurich,
Switzerland.  The price of precious and base metals such as gold and
silver has fluctuated widely in recent years, and is affected by numerous
factors beyond our control,
  - 4
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  including
international, economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates, global or regional consumptive
patterns, speculative activities and increased production due to new extraction
developments and improved extraction and production methods.  The
effect of these factors on the price of base and precious metals, and,
therefore, the change in the value of our retained earnings, if any, held in
bullion accounts cannot accurately be predicted and is subject to significant
fluctuation.  There can be no assurance that the value of any bullion
accounts established by us in the future to hold retained mineral reserves, if
any, will not be adversely impacted by fluctuations in the price of base and
precious metals resulting in significant losses.
  Summary
of our Mineral Property Interests
  A
description of each of our options to acquire the mineral and mining rights
underlying properties located in Argentina and Peru and the conditions that we
must meet to exercise these options is set forth in Item 2 of this annual
report.
 
 Effect
of Governmental Regulation on Our Business
 
 We will be required to comply with all
regulations, rules and directives of governmental authorities and agencies
applicable to the exploration of minerals in Argentina and Peru.  The
discussion that follows is a summary of the most significant government
regulations which we anticipate will impact our operations.
 
 Argentina
 
 Argentina is the second largest
country in South America, over 2.7 million square kilometres in area. In 1983,
Argentina returned to a multi-party democracy, which brought an end to nearly a
half century of military intervention and political instability.  The
country then began to stabilize; however, it was not until 1989, with the
election of the government under President Carlos Menem, that Argentina's
economy began to improve.  President Menem initiated economic reforms
that included the privatization of many state companies and the implementation
of the Convertibility Plan, which fixed the Argentine peso to the U.S. dollar at
par.  Results of the reforms were positive; Argentina's gross domestic
product grew at up to 8% per annum in the early 1990s and inflation dropped to
between 1% and 3% per annum.  However, following a recession in 1999
and 2000, a severe political and economic crisis occurred in late
2001.  In early 2002, the government chose to devalue the peso, before
allowing the peso to float in February 2002. During the period 2003-2008,
Argentina has had one of its most important economic growth cycles with average
annual growth rate of around 8%. However, during the last quarter of 2008, the
economic growth in Argentina decreased due to the world-wide financial crisis
and the reduction in commodity prices.
 
 In 1993, the Mining Investments Act
(the “Act”) instituted a new system for mining investment to encourage mineral
exploration and foreign investment in Argentina. Key incentives provided by the
Act include guaranteed tax stability for a 30-year period, 100% income tax
deductions on exploration costs in addition to the deduction as expenses or
investment that may correspond according to applicable income tax laws,
accelerated amortization of investments in infrastructure, machinery and
equipment, exemption from tax on minimum presumed income, and the exemption from
import duties on capital goods, equipment and raw materials used in mining and
exploration. Repatriation of capital or transfer of profits is unrestricted.
Argentina's mineral resources, administered by its 23 provinces or the
Argentinean Federal Government, depending where they are located, are subject to
a provincial royalty capped at 3% of the “mouth of mine” value of production,
although provinces may opt to waive or reduce this royalty.
 
 Under Decree. No. 753/2004 (“Decree”),
mining companies that obtain the stability rights afforded by the Act are
excluded from the application of certain exchange control regulations currently
in force. If fact, under this Decree, mining companies that obtain such
stability rights:
 
 ·
              are
      exempted from the obligation of bringing into Argentina and trading on the
      Foreign Exchange Market (“FEM”) the proceeds from exports of products
      extracted from the project.  This exemption also allows the
      collection of certain tax returns for the exportation of products without
      the need to fulfill the referred obligation (other exporters cannot
      collect the export tax returns before evidencing the fulfillment of said
      obligation); and
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  ·
              are
      exempted from restrictions on the free availability (meaning the
      obligation of bringing into Argentina and trading on the FEM) of foreign
      borrowings for the development of productive mining ventures in Argentina
      intended for export (provided that, in principle, such borrowings must be
      cancelled with export proceeds).
  Property
and Title in Argentina
  The laws, procedures and terminology
regarding mineral title in Argentina differ considerably from those in the
United States. According to Argentine Political State Organisation, the mines
(and their mineral thereof) belong to the Provinces on where they are located,
which grant the exploration permits and mine concessions to the
applicants.
 
 However, the Argentinean Federal
Government is entitled to enact the National Mining Code (the “Mining Code”),
which is applicable to the whole country, while the Provinces have the power to
regulate the procedure aspects of the Mining Code through each Provincial Mining
Procedure Code and to organize the concession and enforcement
authorities.
 
 In general, a similar concept applies
to the environmental aspects related to mining activities. Although the Mining
Code includes a chapter that regulates the main aspects of environmental
regulations, Provinces are the enforcement authorities. Furthermore, in
application of Section 121 and Section 41 of the Argentine Constitution, many
provinces have also enacted additional environmental laws, which directly or
indirectly are applicable to mining activities.
 
 The
following summarizes the material aspects of Argentinean mining
law.
 
 Mining
Code
 
 The rights, obligations, and procedures
for the acquisition, exploration, exploitation, and use of mineral substances in
Argentina are regulated by the Mining Code. The Mining Code establishes three
classes of minerals, two of which are: (i) the main metalliferous substances
such as gold, silver, copper, and lead whose ownership is vested in the
provincial government, which in turn grants exploitation concessions to private
companies; and (ii) the other metalliferous substances, which include earthy
minerals and industrial minerals that belong to the land owner. Except for
minerals contained in this last category, mineral rights in Argentina are
separate rights from surface ownership rights. Creek bed and placer deposits, as
well as abandoned tailings and mine waste rock deposits, are included in the
latter mineral class.
 
 Cateo
 
 A cateo is an exploration concession
which does not permit mining but gives the owner a preferential right to a
mining concession for exploitation of minerals discovered in the same area.
Cateos are measured in 500 ha unit areas. A cateo cannot exceed 20 units (10,000
ha). No person may hold more than 20 permits or 400 units in a single province.
The term of a cateo is based on its area: 150 days for the first unit (500 ha)
and an additional 50 days for each unit thereafter. After a period of 300 days,
50% of the area over four units (2,000 ha) must be relinquished. At 700 days,
50% of the area remaining must be relinquished. Extensions may be granted to
allow for bad weather, difficult access, or similar issues. Cateos are
identified by a file number or dossier number.
 
 Cateos
are awarded by the following process:
 
 (i)
              an
      application is made in respect of a designated area, describing a minimum
      work program and an estimation of the investment to be made and a schedule
      for exploration;
 
 (ii)
              approval
      is granted by the province and a formal placement on the official map or
      graphic register is made provided the requested area is not superseded by
      a previous mining right;
 
 (iii)
              publication
      of the claim is made in the provincial official bulletin so as to notify
      third parties of the claim,
and;
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 (iv)
              upon
      expiry of a period following publication in the official bulletin, the
      cateo is awarded.
 
 The length of this process varies
depending on the province, and often takes up to two years. Applications are
processed on a first-come, first-serve, basis. During the application period,
the first applicant has rights to any mineral discoveries made by third parties
in the area of the cateo without its prior consent.
 
 Until August 1995, a “canon fee”, or
tax, of AR$400 per unit was payable upon the awarding of a cateo. A recent
amendment to this law requires that a canon fee be paid upon application for the
cateo. The canon fee for the cateo is paid once for the whole duration of the
exploration permit.
 
 Mina
 
 Although the previous granting of a
cateo is not a pre-condition for the granting of a exploitation right, the most
common way to acquire a mina would be by discovering a mine as a consequence of
an exploration process under the permit of a cateo. To convert an exploration
concession to a mining concession, some or all of the area of a cateo must be
converted to a “mina”. Minas are mining concessions which permit mining on a
commercial basis. The area of a mina is measured in “pertenencias”. Each mina
may consist of one or more pertenencias. “Common pertenencias” are 6 ha and
“disseminated pertenencias” are 100 ha (relating to disseminated deposits of
metals rather than discrete veins). The mining authority may determine the
number of pertenencias required to cover the geologic extent of the mineral
deposit in question. Once granted, minas have an indefinite term assuming the
requirements of law and exploration development or mining is in
progress.
 
 To convert an exploration concession to
a mining concession a declaration of manifestation of discovery wherein a point
within a cateo must be nominated as a discovery point. The manifestation of
discovery is used as a basis for location of the pertenencias. Manifestations of
discovery do not have a definite area until pertenencias are
proposed.  Within a period following designation of a manifestation of
discovery, the claimant may do further exploration, if necessary, to determine
the size and shape of the ore body.
 
 Following a publication and opposition
period and approval by the province, a formal survey of the pertenencias,
together forming the mina, is completed. A surveyed mina provides the highest
degree of mineral rights in Argentina.
 
 The application to the mining authority
must include official cartographic coordinates of the mine location and of the
reconnaissance area, and a sample of the mineral discovered. The reconnaissance
area, which may be as much as twice the surface area projection of the mine, is
intended to allow for the geological extent of the ore body and for site layout
and development. Excess area is released once the survey plans are approved by
the mining authority.
 
 Once the application for a mine has
been submitted, the holder of the mining concession may commence the mining
operation. Any person opposed to the mine operation, whether a holder of an
overlapping cateo, a land owner disputing the existence of the ore deposit or
the class of the economic mineral, or a partner in the discovery who claims to
have been neglected, must register his opposition to the operation with the
mining authority.
 
 New mining concessions may also be
awarded for mines that were abandoned or for which their original mining
concessions were declared to have expired. In such cases, the first person
claiming an interest in the property will have priority. A new mining concession
will be awarded for the mine in the condition left by the previous
holder.
 
 The titleholder of a mine must fulfill
three conditions as part of its mining concession in order to maintain its title
to the mining concession in good standing: (i) payment of mining canons; (ii)
provision of minimum investment; and (iii) continuous mining activity (if the
mine is shut down for more than four years, the mining authority may demand the
mine to be reactivated and a new investment plan be submitted).
  - 7
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 Table of Contents
  
 Mining canons are paid to the state
(national or provincial) under which the mining concession is registered, and
are paid in equal instalments twice yearly. The canon is set by national law
according to the category of the mine. In general, the canon due per year is
AR$80 per 6 ha pertenencia for common ore bodies held by the mining concession,
or AR$800 per 100 ha pertenencia for disseminated ore bodies. Failure to comply
with this obligation for fourteen months results in the cancellation of the
mining right. However, the titleholder can recover the mining right during 45
days after being notified by the Mining Authority, by paying the due canon plus
20% charge as a fine. The discoverer of the mine is exempt from paying canons
for three years from the date on which formal title was awarded to the
mine.
 
 The holder of the mining concession
must also commit to investing in the fixed assets of the property to a minimum
of at least 500 times the value of the annual mining canon, over a period of
five years. In the first two years, 20% of the total required investment must be
made in each year. For the final three years, the remaining 60% of the total
required investment may be distributed in any other manner to the discretion of
the concessionaire. The mining concession expires if the minimum required
investment schedule is not met. If the exploration or exploitation works at the
mine are suspended for more than four years in a row, the mining authority can
require the holder of the concession to prepare and undertake a plan to activate
or reactivate work. Failure to file such reactivation plan within six months
results in the cancellation of the mining right. Such work must be completed on
the property within a maximum period of five years.
 
 A new mining operation and the mineral
products arisen therefrom are entitled to national, provincial, and municipal
tax exemptions for five years (the obligation to pay mining canons is excluded
from this exemption). The exemptions commence with the awarding of formal title
to the mine. As discussed above, the Mining Investment Act has established a
30-year guarantee of fiscal stability for new mining projects and/or extension
of existing projects which applies retroactively, once approved, to the date of
presentation of the feasibility study for the project. The law allows for
accelerated depreciation of capital goods, deductions in exploration costs, and
access to machinery and equipment at international prices.
 
 The major taxes that affect the mining
sector are National Income Tax (35%), Gross Revenue Tax (1% of revenue,
depending on the province), Mining Royalties paid to the provinces where the
mining project is located (up to a maximum cap of 3% of the “mouth of mine”
value of production, depending on the province), and export duties on mining
products as set forth by Resolution 11/2002 (5% and 10%, depending on the
mineral product).
 
 Environmental
Regulation
 
 The Environmental Protection Section
of the Mining Code of Argentina, enacted in 1995, requires that each Provincial
government monitor and enforce the laws pertaining to subscribed development and
protection of the environment.
 
 Provinces are allowed to withdraw
areas from the normal cateo/mina process. These lands may be held directly by
the province or assigned to provincial companies for study or exploration and
development.
 
 A party wishing to commence or modify
any mining-related activity as defined by the Mining Code, including
prospecting, exploration, exploitation, development, preparation, extraction,
and storage of mineral substances, as well as property abandonment or mine
closure activity, must prepare and submit to the Provincial Environmental
Management Unit (“PEMU”) an Informe de Impacto Ambiental or Environmental Impact
Assessment (“EIA”) prior to commencing the work. Each EIA must describe the
nature of the proposed work, its potential risk to the environment, and the
measures that will be taken to mitigate that risk. The PEMU has a 60-day period
to review and either approve or reject the EIA. However, the EIA is not
considered to be automatically approved if the PEMU has not responded within
that period. If the PEMU deems that the EIA does not have sufficient content or
scope, the party submitting the EIA is granted a 30-day period in which to
resubmit the document.
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 If accepted by the PEMU, the EIA is
used as the basis to create a Declaración de Impacto Ambiental or Declaration of
Environmental Impact (“DEI”) to which the party must swear to uphold during the
mining-related activity in question. The DEI must be updated every two years,
with a report on the results of the protection measures taken. If protection
measures are deemed inadequate, additional environmental protection may be
required. Mine operators are liable for environmental damage. Sanctions and
penalties for non-compliance to the DEI are outlined in the Environmental
Protection Section of the Mining Code, and may include warnings, fines,
suspension of environmental Quality Certification, restoration of the
environment, temporary or permanent closure of activities, and removal of
authorization to conduct mining-related activities.
 
 Further to the provisions of the
Mining Code on Environmental Protection, mining activities are also subject to
other environmental regulations issued at national and provincial level (from
the province in where such activities are carried out).
 
 All mineral rights described above
are considered forms of proprietary rights and can be sold, leased or assigned
to third parties on a commercial basis. As described before, cateos and minas
can be forfeited if minimum work and investments requirements are not performed
or if annual payments are not made. Generally, notice and an opportunity to cure
defaults is provided to the owner of such rights.
 
 Peru
 
 Peru is located on the western coast of
South America and has a population of approximately 28 million. It covers a
geographic area of approximately 1.3 million square kilometres and is bordered
by Bolivia, Brazil, Chile, Colombia and Ecuador.  Lima is Peru's
capital and principal city and has a population of approximately 7
million.
 
 Peru has become a leading country for
mining activities. No special taxes or registration requirements are imposed on
foreign-owned companies and foreign investment is treated as equal to domestic
capital. Peruvian law allows for full repatriation of capital and profits and
the country’s mining legislation provides access to mining concessions under an
efficient registration system.
 
 Peruvian
Mining Law
 
 Under Peru’s Uniform Text of Mining Law
(“UTM”), the right to explore for and exploit minerals is granted by the
government by way of concessions.  A Peruvian mining concession is a
property right, independent from the ownership of surface land on which it is
located.  There are no restrictions or special requirements applicable
to foreign companies or individuals regarding the holding of mining concessions
in Peru unless the concessions are within 50 kilometres of Peru's
borders.  The rights granted by a mining concession can be
transferred, or sold and, in general, may be the subject of any transaction or
contract.  Mining concessions may be privately owned and no state
participation is required.
 
 The application for a mining concession
involves the filing of documents before the mining administrative
authority.  The mining concession boundaries are specified in the
application documents, with no requirement to mark the concession boundaries in
the field since the boundaries are fixed by UTM coordinates. In order to conduct
exploration or mining activities, the holder of a mining concession must
purchase the surface land required for the project or reach agreement with the
owner for its temporary use. If any of this is not possible, a legal easement
may be requested from the mining authorities, although these easements have been
rarely granted.
  Mining concessions are irrevocable as
long as their holders pay an annual fee of US $3 per hectare and reach minimum
production levels within the terms set forth by law or otherwise pay penalties,
as applicable. Non-compliance with any of these mining obligations for two
consecutive years will result in the cancellation of the mining
concession.
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   Pursuant to the original legal
framework, in force since 1992, holders of mining concessions are obliged to
achieve a minimum production of US $100 per hectare per year within six years
following the year in which the respective mining concession title is granted.
If this minimum production is not reached, as of the first six months of the
seventh year, the holder of the concession shall pay a US $6 penalty per hectare
per year until such production is reached and penalties increase to US $20 in
the 12th year.
Likewise, it is possible to avoid payment of the penalty if evidence is
submitted to the mining authorities that an amount 10 times the applicable
penalty or more had been invested.
 
 However, this regime has been recently
and partially amended providing for, among other matters, increased minimum
production levels, new terms for obtaining such minimum production, increased
penalties in case such minimum production is not reached, and even the
cancellation of mining concessions if minimum production is not reached within
certain terms. Pursuant to this new regime, the holder of the mining concession
should achieve a minimum production of at least one tax unit (S/. 3,500,
approximately US $1,100) per hectare per year, within a ten-year term following
the year in which the mining concession title is granted. If such minimum
production is not reached within the referred term, the holder of the concession
shall pay penalties equivalent to 10% of the tax unit.
 
 If the minimum production is not
reached within a fifteen-year term following the granting of the concession
title, the mining concession shall be cancelled by the mining authority, unless
(i) a qualified force majeure event is evidenced to and approved by the mining
authority, or (ii) by paying the applicable penalties and concurrently
evidencing minimum investments of at least ten times the amount of the
applicable penalties; in which cases the concession may not be cancelled up to a
maximum term of five additional years. If minimum production is not reached
within a twenty-year term following the granting of the concession title, the
concession shall inevitably be cancelled.
 
 This amended regime is currently
applicable to all new mining concessions granted since October 11, 2008.
Regarding those mining concessions existing prior to such date, the new term for
obtaining the increased minimum production level or otherwise pay the increased
penalties pursuant to the amended regime shall be counted as from the first
business day of 2009. Nevertheless, until such new term for obtaining the
increased minimum production level does not expire, the minimum production
level, the term for obtaining such minimum production, the amount of the
penalties and the causes for cancellation of the mining concessions shall
continue to be those provided in the original legal framework existing since
1992.
 
 The amended regime shall not be
applicable to (i) those concessions handed by the Peruvian State through private
investment promotion procedures, which shall maintain the production and
investment obligations contained in their respective agreements, and/or (ii) to
titleholders of concessions with mining stability agreements in
force.
 
 Environmental
Laws
 
 The Peruvian Ministry of Energy and
Mines ("MEM") regulates environmental affairs in the mining sector, including
establishing an environmental protection regulations; while the Organism for
Supervising Investment in Energy and Mining verifies environmental compliance
and imposes administrative sanctions, although it is likely that in the near
future this functions be assumed by the recently created Ministry of
Environment.
 
 Each stage of exploration or mining
requires some type of authorization or permit, beginning with an application for
an environmental permit for initial exploration and continuing with an
Environmental Impact Assessment ("EIA") for mining, which includes public
hearings.
 
 
  - 10
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 Table of Contents
  For
permitting purposes, exploration activities in Peru are classified in two
categories:
 
 ·
              Category
      I projects:  Mining exploration activities that comprise
      any of the following:  (i) a maximum of 20 drilling platforms;
      (ii) a disturbed area of less than 10 hectares considering drilling
      platforms, trenches, auxiliary facilities and access means; and, (iii) the
      construction of tunnels with a total maximum length of 50
      meters.  Holders of these projects must submit an Environmental
      Impact Statement (“EIS”) before the MEM, which in principle, is subject to
      automatic approval upon its filing, and subject to subsequent (ex post)
      review by the latter.  Nevertheless, in any of the following
      cases, the project shall not be subject to automatic approval and shall
      necessarily obtain an express prior approval by MEM, which should be
      granted, in principle, within a term of two months since filing the EIS:
      (i) the project is located in a protected natural area or its buffer zone;
      (ii) the project is oriented to determining the existence of radioactive
      minerals; (iii) the platforms, drill holes, trenches, tunnels or other
      components would be located within certain specially environmental
      sensitive areas specified in the applicable regulations (e.g., glaciers,
      springs, water wells, groundwater wells, protection lands, primary woods,
      etc.); (iv) the project covers areas where mining environmental
      contingencies or non-environmental rehabilitated previous mining works,
      already exist
  ·
              Category
      II projects:  Mining exploration activities that comprise
      any of the following: (i) more than 20 drilling platforms; (ii) a
      disturbed area of more than 10 hectares considering drilling plants,
      trenches, auxiliary facilities and access means; and, (iii) the
      construction of tunnels over a total length of 50 meters.  These
      projects require an authorization that should be granted once the
      semi-detailed Environmental Impact Assessment (EIA) is approved by the
      MEM. Such authorization should, in principle, take approximately four
      months.
  Before initiating construction or
exploitation activities and to the expansion of existing operations, an EIA
should be approved. This process of authorization involves public hearings in
the place where the project is located and, in principle, should conclude within
a term of 120 calendar days, although in practice it might take between eight
months and one year.
 
 Holders of mining activities performing
mining exploration shall conduct remediation works of disturbed areas, as part
of the progressive closure of the project. Likewise, they shall undertake those
final closure and post closure actions in the terms and conditions set forth in
the approved environmental instrument.
 
 If said holders shall carry out mining
exploration activities involving the removal of more than 10,000 tonnes of
material, or more than 1,000 tonnes of material with a potential neutralization
(PN) over potential acidity (“PA”) relation lower than 3 (PN/PA<3), then they
shall be required to file a Mine Closure Plan (“MCP”) along with the
corresponding environmental instrument, as well as to establish a financial
guarantee to secure compliance therewith.
 
 Holders of mining exploitation
activities must file a MCP before the MEM, within one year of the approval of
their EIA. The MCP must be implemented as from the beginning of the mining
operation. Semi-annual reports must be filed evidencing compliance with the MCP.
An environmental guarantee covering the MCP’s estimated costs should be
granted.
 
 Mining
Royalties
 
 Peruvian law requires that concession
holders pay a mining royalty as consideration for the extraction of mineral
resources. The mining royalty is payable monthly on a variable cumulative rate
of 1% to 3% of the value of the ore concentrate or equivalent, calculated in
accordance with price quotations in international markets, subject to certain
deductions such as indirect taxes, insurance, freight and other specified
expenses.  The mining royalty
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  payable
is determined based on the following schedule: (i) under US $60 million of
annual sales of concentrates: 1% royalty; (ii) in excess of US $60 million and
up to US $120 million of annual sales: 2% royalty; and (iii) in excess of
US $120 million of annual sales: 3% royalty.
 
 Competition
 
 We are an
exploration stage mineral resource exploration company that competes with other
mineral resource exploration companies for financing and for the acquisition of
new mineral properties. Many of the mineral resource exploration companies with
whom we compete have greater financial and technical resources than those
available to us. Accordingly, these competitors may be able to spend greater
amounts on acquisitions of mineral properties of merit, on exploration of their
mineral properties and on development of their mineral properties. In addition,
they may be able to afford more geological expertise in the targeting and
exploration of mineral properties. This competition could result in competitors
having mineral properties of greater quality and interest to prospective
investors who may finance additional exploration and development. This
competition could adversely impact on our ability to achieve the financing
necessary for us to conduct further exploration of our mineral properties. We
will also compete with other mineral exploration companies for financing from a
limited number of investors that are prepared to make investments in mineral
exploration companies. The presence of competing mineral exploration companies
may impact on our ability to raise additional capital in order to fund our
exploration programs if investors are of the view that investments in
competitors are more attractive based on the merit of the mineral properties
under investigation and the price of the investment offered to investors. We
will also be compete with other mineral companies for available resources,
including, but not limited to, professional geologists, camp staff, mineral
exploration supplies and drill rigs.
 
 Intellectual
Property
  We do not
own, either legally or beneficially, any patent or trademark.
  Employees
  We have
no full-time employees at the present time.   Our executive
officers do not devote their services full time to our
operations.
  We also engage contractors from time to
time to consult with us on specific corporate affairs or to perform specific
tasks in connection with our exploration programs.  On October 15,
2008, we entered into a services contract with Logistica y Servicios Aluviales
San Lorenzo SAC ("San Lorenzo"), a Peruvian Service company, to supply us with
mining services on a contract basis for the purpose of developing our interests
in mining properties located in the area referred to as the Gold Sands district
of northeastern Peru.
  Research
and Development Expenditures
  We have
not incurred any research or development expenditures since our
incorporation.
  Subsidiaries
  We have one subsidiary, Constitution
Mining SA, which was registered with the General Inspection of Corporations in
Argentina on March 4, 2008 and formed for the purpose of acquiring and exploring
natural resource properties in Argentina.
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 Table of Contents
   Glossary
of Certain Mining Terms
  Alluvial
      -
                Material
      deposited by the action of running water.Alternation
      -
                Any
      physical or chemical change in a rock or mineral subsequent to its
      formation.  Milder and more localized than
      metamorphism.Andesite
      -
                A
      volcanic rock of intermediate composition.Anomaly
      -
                Any
      departure from the norm which may indicate the presence of mineralization
      in the underlying bedrock.Anticline
      -
                An
      arch or fold in layers of rock shaped like the crest of a
      wave.Aplite
      -
                A
      fine-grained, light coloured intrusive rock of granitic
      composition.Arsenic-sulfides
      -
                Sulphide
      minerals rich in arsenic such as arsenopyrite and arsenopolybasite.Banded
      -
                Iron
      formation - A bedded deposit of iron minerals.Basalt
      -
                An
      excursive volcanic rock composed primarily of plagioclase, pyroxene and
      some olivine.Base
      Camp -
                Centre
      of operations from which exploration activity is
  conducted.Base
      Metal -
                Any
      non-precious metal (e.g., copper, lead, zinc, nickel,
    etc.).Bedding
      -
                The
      arrangement of sedimentary rocks in layers.Biotite
      -
                A
      platy magnesium-iron mica, common in igneous rocks.Breccia
      -
                A
      rock in which angular fragments are surrounded by a mass of fine-grained
      minerals.Bulk
      Sample -
                A
      large sample of mineralized rock, frequently hundreds of tonnes, selected
      in such a manner as to be representative of the potential orebody being
      sampled. Used to determine metallurgical
  characteristics.Bullion
      -
                Metal
      formed into bars or ingots.Carbonate
      -
                A
      sediment formed by the organic or inorganic precipitation from aqueous
      solution of carbonates of calcium, magnesium, or iron; e.g., limestone and
      dolomite.Chalcopyrite
      -
                A
      sulphide mineral of copper and iron; the most important ore mineral of
      copper.Chlorite
      -
                Fe
      (iron) and Mg (magnesium) rich mineral that is commonly an alteration
      product of mafic mineralClay
      -
                A
      fine-grained material composed of hydrous aluminum
    silicates.Collar
      -
                The
      term applied to the timbering or concrete around the mouth of a shaft;
      also used to describe the top of a mill hole.Concentrate
      -
                A
      fine, powdery product of the milling process containing a high percentage
      of valuable metal.Concentrator
      -
                A
      milling plant that produces a concentrate of the valuable minerals or
      metals. Further treatment is required to recover the pure
      metal.Contact
      -
                A
      geological term used to describe the line or plane along which two
      different rock formations meet.Core
      -
                The
      long cylindrical piece of rock, about an inch in diameter, brought to
      surface by diamond drilling.Crystalline
      -
                Pertaining
      to, or having the nature of, a crystal.Development
      -
                Underground
      work carried out for the purpose of opening up a mineral deposit. Includes
      shaft sinking, crosscutting, drifting and raising.Diamond
      -
                The
      hardest known mineral, composed of pure carbon; low-quality diamonds are
      used to make bits for diamond drilling in rock.Diamond
      drill -
                A
      rotary type of rock drill that cuts a core of rock that is recovered in
      long cylindrical sections, two cm or more in diameter.Diamond
      drilling -
                A
      type of rotary drilling in which diamond bits are used as the rock-cutting
      tool to produce a recoverable drill core sample of rock for observation
      and analysis.
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 Diorite
      -
                An
      intrusive igneous rock composed chiefly of sodic plagioclase, hornblende,
      biotite or pyroxene.Dip
      -
                The
      angle at which a vein, structure or rock bed is inclined from the
      horizontal as measured at right angles to the strike.Disseminated
      -
                Where
      minerals occur as scattered particles in the rock.Disseminated
      ore -
                Ore
      carrying small partides of valuable minerals spread more or less uniformly
      through the host rock.Dyke
      -
                A
      long and relatively thin body of igneous rock that, while in the molten
      state, intruded a fissure in older rocks.Epithermal
      -
                Low
      temperature hydrothermal process or product.Erosion
      -
                The
      breaking down and subsequent removal of either rock or surface material by
      wind, rain, wave action, freezing and thawing and other
      processes.Exploration
      -
                Prospecting,
      sampling, mapping, diamond drilling and other work involved in searching
      for ore.Fault
      -
                A
      break in the Earth’s crust caused by tectonic forces which have moved the
      rock on one side with respect to the other.Feldspar
      -
                A
      group of common rock-forming minerals that includes microcline,
      orthoclase, plagioclase and others.Fine
      gold -
                Fineness
      is the proportion of pure gold or silver in jewelry or bullion expressed
      in parts per thousand. Thus, 925 fine gold indicates 925 parts out of
      1,000, or 92.5% is pure gold.Fold
      -
                Any
      bending or wrinkling of rock strata.Fracture
      -
                A
      break in the rock, the opening of which allows mineral-bearing solutions
      to enter. A “cross-fracture” is a minor break extending at more-or-less
      right angles to the direction of the principal
  fractures.Galena
      -
                Lead
      sulphide, the most common ore mineral of lead.Geochemistry
      -
                The
      study of the chemical properties of rocks, soil or
silt.Geology
      -
                The
      science concerned with the study of the rocks which compose the
      Earth.Geophysical
      Survey -
                A
      scientific method of prospecting that measures the physical properties of
      rock formations. Common properties investigated include magnetism,
      specific gravity, electrical conductivity and
    radioactivity.Geophysics
      -
                The
      study of the physical properties of rocks and minerals.Grab
      Sample -
                A
      sample from a rock outcrop that is assayed to determine if valuable
      elements are contained in the rock. A grab sample is not intended to be
      representative of the deposit, and usually the best-looking material is
      selected.Granite
      -
                A
      coarse-grained intrusive igneous rock consisting of quartz, feldspar and
      mica.Granodiorties
      -
                A
      coarse-grained intrusive rock of intermediate
  composition.Hematite
      -
                An
      oxide of iron, and one of that metal’s most common ore minerals. High
      grade - Rich ore. As a verb, it refers to selective mining of the best ore
      in a deposit.Host
      Rock -
                The
      rock surrounding an ore deposit.Hydrothermal
      -
                Relating
      to hot fluids circulating in the earth’s crust.Induced
      polarization (IP) -
                A
      method of ground geophysical surveying employing an electrical current to
      determine indications of mineralization.Industrial
      Minerals -
                Non-metallic,
      non-fuel minerals used in the chemical and manufacturing
      industries.  Examples are asbestos, gypsum, salt, graphite,
      mica, gravel, building stone and talc.Intrusive
      -
                A
      body of igneous rock formed by the consolidation of magma intruded into
      other rocks, in contrast to lavas, which are extruded upon the
      surface.
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 Jig
      -
                A
      piece of milling equipment used to concentrate ore on a screen submerged
      in water, either by the reciprocating motion of the screen or by the
      pulsation of water through it.Lamprophyre
      -
                An
      igneous rock, composed of dark minerals, that occurs in dykes; sometimes
      contains diamonds.Lens
      -
                Generally
      used to describe a body of ore that is thick in the middle and tapers
      towards the ends.Level
      -
                The
      horizontal openings on a working horizon in a mine; it is customary to
      work mines from a shaft, establishing levels at regular intervals,
      generally about 50 meters or more apart.Limonite
      -
                A
      brown, hydrous iron oxide.Lode
      -
                A
      mineral deposit in solid rock.Mafic
      -
                Igneous
      rocks composed mostly of dark, iron- and magnesium-rich
      minerals.Magma
      -
                The
      molten material deep in the Earth from which rocks are
    formed.Magnetite
      -
                Black,
      magnetic iron ore, an iron oxide.Metallurgical
      coal -
                Coal
      used to make steel.Microcrystalline
      -
                A
      crystalline texture visible only under a microscope.Mineral
      -
                A
      naturally occurring homogeneous substance having definite physical
      properties and chemical composition and, if formed under favorable
      conditions, a definite crystal form.Mineralization
      -
                Occurrences
      of minerals, which may have an economic value.Mineralization
      -
                A
      natural concentration in rocks or soil of one or more metalliferous
      minerals.Monzogranite
      -
                A
      coarse-grained, quartz-poor intrusive rock of granitic.Net
      smelter return -
                A
      share of the net revenues generated from the sale of metal produced by a
      mine.Oligocene
      -
                An
      epoch of the lower Tertiary period of the Cenozoic era considered to have
      covered the span of time between 38 and 25 million years
    ago.Ordovician
      age -
                The
      second earliest period of the Palaeozoic era considered to have covered
      the span of time between 500 and 440 million years ago.Ore
      -
                A
      mixture of ore minerals and gangue from which at least one of the metals
      can be extracted at a profit.Orebody
      -
                A
      natural concentration of valuable material that can be extracted and sold
      at a profit.Outcrop
      -
                An
      exposure of rock or mineral deposit that can be seen on surface, that is,
      not covered by soil or water.Pegmatite
      -
                A
      coarse-grained, igneous rock, generally coarse, but irregular in texture,
      and similar to a granite in composition; usually occurs in dykes or veins
      and sometimes contains valuable minerals.Permian
      -
                The
      last period of the Palaeozoic era considered to have covered the span of
      time between 290 and 250 million years ago.Placer
      -
                A
      deposit of sand and gravel containing valuable metals such as gold, tin
      or
                  diamonds.Plant
      -
                A
      building or group of buildings in which a process or function is carried
      out; at a mine site it will include warehouses, hoisting equipment,
      compressors, maintenance shops, offices and the mill or
      concentrator.Plug
      -
                A
      common name for a small offshoot from a large body of molten
      rock.Porphyry
      -
                Any
      igneous rock in which relatively large crystals , called phenocrysts, are
      set in a fine-grained groundmass.Prospect
      -
                A
      mining property, the value of which has not been determined by
      exploration.
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 Table of Contents
  
 Pyrite
      -
                A
      yellow iron sulphide mineral, normally of little value. It is sometimes
      referred to as “fool’s gold”Pyrite
      -
                An
      iron sulphide mineral (FeS2), the most common naturally occurring sulphide
      mineral.Quartenary
      -
                The
      last period of time considered to have  covered the span of time
      between 0 and 2 million years ago.Quartz
      -
                Common
      rock-forming mineral consisting of silicon and oxygen.Reclamation
      -
                The
      restoration of a site after mining or exploration activity is
      completed.Reconnaissance
      -
                A
      preliminary survey of ground.Resource
      -
                The
      calculated amount of material in a mineral deposit, based on limited drill
      information.Reverse
      Circulation Drilling (RC) -
                A
      drilling method used in geological appraisals whereby the drilling fluid
      passes inside the drill stem to a down-the-hole percussion bit and returns
      to the surface outside the drill stem carrying the drill chip
      samples.Rhyolite
      -
                A
      fine-grained, extrusive igneous rock which has the same chemical
      composition as granite.Rock
      -
                Any
      natural combination of minerals; part of the earth’s
  crust.Sample
      -
                A
      small portion of soil, silt, rock or a mineral deposit taken so that the
      metal content can be determined by assaying.Sampling
      -
                Selecting
      a fractional but representative part of a mineral deposit for
      analysis.Scorodite
      -
                A
      pale leek-green iron and arsenic rich mineral.Sedimentray
      -
                Formed
      by the deposition of sediment or pertaining to the process of
      sedimentation.Sediments
      -
                Solid
      fragmental material that originates from weathering of rocks and is
      transported or deposited by air, water, or ice, or that accumulates by
      other natural agents, such as chemical precipitation from solution or
      secretion by organisms, and that forms in layers on the Earth's surface at
      ordinary temperatures in a loose, unconsolidated form; e.g., sand, gravel,
      silt, mud, alluvium.Seismic
      prospecting -
                A
      geophysical method of prospecting, utilizing knowledge of the speed of
      reflected sound waves in rock.Shear
      or Shearing -
                The
      deformation of rocks by lateral movement along innumerable parallel
      planes, generally resulting from pressure and producing such metamorphic
      structures as cleavage and schistosity.Shear
      zone -
                A
      zone in which shearing has occurred on a large scale.Shoot
      -
                A
      concentration of mineral values; that part of a vein or zone carrying
      values of ore grade.Showing
      -
                Surface
      occurrence of mineral.Siderite
      -
                Iron
      carbonate, which when pure, contains 48.2% iron; must be roasted to drive
      off carbon dioxide before it can be used in a blast furnace. Roasted
      product is called sinter.Silica
      -
                Silicon
      dioxide. Quartz is a common example.Siliceous
      -
                A
      rock containing an abundance of quartz.Sill
      -
                An
      intrusive sheet of igneous rock of roughly uniform thickness that has been
      forced between the bedding planes of existing rock.Skam
      -
                Name
      for the metamorphic rocks surrounding an igneous intrusive where it comes
      in contact with a limestone formation.Sphalerite
      -
                A
      zinc sulphide mineral; the most common ore mineral of
  zinc.Stratigraphy
      -
                Strictly,
      the description of bedded rock sequences; used loosely, the i"sequence
      of bedded rocks in a particular area.Strike
      -
                The
      direction, or bearing from true north, of a vein or rock formation measure
      on a horizontal surface.
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 Table of Contents
  
 Strike-slip
      -
                The
      component of movement or slip that is parallel to the strike of a body or
      plane.Stripping
      ratio -
                The
      ratio of waste relative to ore removed from a surface mine. Usually
      expressed as tonne:tonne (t:t).Subvolcanic
      -
                A
      volcanic rock formed not far from the surface.Sulphide
      -
                A
      compound of sulphur and some other element.Tailings
      -
                Material
      rejected from a mill after most of the recoverable valuable minerals have
      been extracted.Tertiary
      -
                The
      first period of the Cenozoic era considered to have covered the span of
      time between 2 and 65 million years ago.Trench
      -
                A
      long, narrow excavation dug through overburden, or blasted out of rock, to
      expose a vein or ore structure.Trenching
      -
                The
      process of exploration by which material is removed from a trench cut from
      the earth's surface.Trend
      -
                The
      direction, in the horizontal plane, of a linear geological feature, such
      as an ore zone, measured from true north.Tuff
      -
                Rock
      composed of fine volcanic ash.Tunnel
      -
                A
      horizontal underground opening, open to the atmosphere at both
      ends.Vein
      -
                A
      fissure, fault or crack in a rock filled by minerals that have travelled
      upwards from some deep source.Volcaniclastics
      -
                Fragmental
      volcanic rocks.Waste
      -
                Un-mineralized,
      or sometimes mineralized, rock that is not minable at a
      profit.Zone
      -
                An
      area of distinct
mineralization.
 
 ITEM 1A.Risk Factors.
  You
should carefully consider the following risk factors in evaluating our business
and us.  The factors listed below represent certain important factors
that we believe could cause our business results to differ.  These
factors are not intended to represent a complete list of the general or specific
risks that may affect us.  It should be recognized that other risks
may be significant, presently or in the future, and the risks set forth below
may affect us to a greater extent than indicated.  If any of the
following risks occur, our business, financial condition or results of
operations could be materially and adversely affected.  You should
also consider the other information included in this Annual Report and
subsequent quarterly reports filed with the SEC.
  Risk
Factors
  Risks
Associated With Our Business
  Our accountants have raised
substantial doubt with respect to our ability to continue as a going
concern.
  As noted in our financial statements,
we have incurred a net loss of $6,873,664 for the period from inception
on March 6, 2000 to December 31, 2008 and have present no source of
revenue.  At December 31, 2008, we had a working capital deficiency of
$162,440.  As of December 31, 2008, we had cash and cash equivalents
in the amount of US $66,580.  We will have to raise additional funds
to meet our currently budgeted operating requirements for the next twelve
months.
  The audit report of James Stafford,
Inc., Chartered Accountants for the fiscal year ended December 31, 2008 and 2007
contained a paragraph that emphasizes the substantial doubt as to our
continuance as a going concern. This is a significant risk that we may not be
able to generate and/or raise enough resources to remain operational for an
indefinite period of time.
  - 17
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 Table of Contents
   We
own the options to acquire the mining and mineral rights underlying certain
properties and if we fail perform the obligations necessary to exercise these
options we will lose our options and cease operations.
 
 We hold
options to acquire the mineral and mining rights underlying properties located
the Salta and Mendoza provinces of Argentina and in Peru, and, if we fail to
meet the requirements of the agreement under which we acquired such options ,
including any payments and/or any exploration obligations that we have regarding
these properties, we may lose our right to exercise the options to acquire the
mineral and mining rights underlying these properties. If we do not fulfill
these conditions, then our ability to commence or continue operations could be
materially limited.  In addition, substantially all of our assets will
be put into commercializing our rights to the areas covered by these option
agreements.  Accordingly, any adverse circumstances that affect the
areas covered by these option agreements and our rights thereto would affect us
and your entire investment in shares of our common stock.  If any of
these situations were to arise, we would need to consider alternatives, both in
terms of our prospective operations and for the financing of our
activities.  Management cannot provide assurance that we will
ultimately achieve profitable operations or become cash-flow positive, or raise
additional debt and/or equity capital.  If we are unable to raise
additional capital in the near future, we will experience liquidity problems and
management expects that we will need to curtail operations, liquidate assets,
seek additional capital on less favorable terms and/or pursue other remedial
measures.
  We
have a limited operating history and have incurred losses that we expect to
continue into the future.
 
 We have not yet located any mineral
reserves and we have never had any revenues from our operations. In addition, we
have a very limited operating history upon which an evaluation of our future
success or failure can be made.  We have only recently taken steps to
implement our business plan to engage in the acquisition of mineral and mining
rights to exploration and development properties in Argentina and Peru, and it
is too early to determine whether such steps will prove
successful.  Our business plan is in its early stages and faces
numerous regulatory, practical, legal and other obstacles.  At this
early stage of our operation, we also expect to face the risks, uncertainties,
expenses and difficulties frequently encountered by companies at the start-up
stage of their business development. We cannot be sure that we will be
successful in addressing these risks and uncertainties, and our failure to do so
could have a materially adverse effect on our financial condition.
  No assurances can be given that we will
be able to successfully complete the purchase of mineral and mining rights to
any properties, including the ones for which we currently hold
options.  Our ability to achieve and maintain profitability and
positive cash flow over time will be dependent upon, among other things, our
ability to (i) identify and acquire properties or interests therein that
ultimately have probable or proven mineral reserves, (ii) sell such mining
properties or interests to strategic partners or third parties or commence the
production of a mineral deposit, (iii) produce and sell minerals at profitable
margins and (iv) raise the necessary capital to operate during this possible
extended period of time.  At this stage in our development, it cannot
be predicted how much financing will be required to accomplish these
objectives.
  We have no known reserves and we may
not find any mineral resources or, if we find mineral resources, the deposits
may be uneconomic or production from those deposits may not be
profitable.
  Our due diligence activities have been
limited, and to a great extent, have relied upon information provided to us by
third parties. We have not established that any of the properties for which we
hold options contain adequate amounts of gold or other mineral reserves to make
mining any of the properties economically feasible to recover that gold or other
mineral reserves, or to make a profit in doing so. If we do not, our business
will fail. If we cannot find economic mineral resources or if it is not economic
to recover the mineral resources, we will have to cease
operations.
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   We
may not have access to all of the supplies and materials we need to begin
exploration that could cause us to delay or suspend operations.
  Competition and unforeseen limited
sources of supplies in the industry could result in occasional spot shortages of
supplies, such as explosives, and certain equipment, such as bulldozers and
excavators, that we might need to conduct exploration. We have not attempted to
locate or negotiate with any suppliers of products, equipment or materials. We
will attempt to locate products, equipment and materials. If we cannot find the
products and equipment we need, we will have to suspend our exploration plans
until we do find the products and equipment we need.
  We
do not have enough money to complete our exploration and consequently may have
to cease or suspend our operations unless we are able to raise additional
financing.
  We presently do not have sufficient
capital to exercise our options to acquire the mineral and mining rights
underlying property located in the Salta and Mendoza provinces of Argentina and
in Peru.  Although management believes that sources of financing are
available to complete the acquisition of these property interests, no assurances
can be given that these financing sources will ultimately be
sufficient.  Other forms of financing, if available, may be on terms
that are unfavorable to our stockholders.
  As we cannot assure a lender that we
will be able to successfully explore and develop our mineral properties, we will
probably find it difficult to raise debt financing from traditional lending
sources. We have traditionally raised our operating capital from sales of equity
and debt securities, but there can be no assurance that we will continue to be
able to do so. If we cannot raise the money that we need to continue exploration
of our mineral properties, we may be forced to delay, scale back, or eliminate
our exploration activities. If any of these were to occur, there is a
substantial risk that our business would fail.
  Our
success is dependent upon a limited number of people.
  The ability to identify, negotiate and
consummate transactions that will benefit us is dependent upon the efforts of
our management team.  The loss of the services of any member of
management could have a material adverse effect on us.
  Our
business will be harmed if we are unable to manage growth.
  Our business may experience periods of
rapid growth that will place significant demands on our managerial, operational
and financial resources.  In order to manage this possible growth, we
must continue to improve and expand our management, operational and financial
systems and controls.  We will need to expand, train and manage our
employee base.  We must carefully manage our mining exploration
activities.  No assurances can be given that we will be able to timely
and effectively meet such demands.
  We
may not be able to attract and retain qualified personnel necessary for the
implementation of our business strategy and mineral exploration
programs.
  Our future success depends largely upon
the continued service of board members, executive officers and other key
personnel.  Our success also depends on our ability to continue to
attract, retain and motivate qualified personnel, particularly employees,
consultants and contractors for our operations in Argentina and
Peru.  Personnel represents a significant asset, and the competition
for such personnel is intense in the mineral exploration industry.  We
may have particular difficulty attracting and retaining key personnel in the
initial phases of our operations.
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  Our
officers and directors may have conflicts of interest and do not devote full
time to the our operations.
  Our officers and directors may have
conflicts of interest in that they are and may become affiliated with other
mining companies.  In addition, our officers do not devote full time
to our operations.  Until such time that we can afford executive
compensation commensurate with that being paid in the marketplace, our officers
will not devote their full time and attention to our operations.  No
assurances can be given as to when we will be financially able to engage our
officers on a full-time basis.
 
 Because
our Chief Executive Officer, Willem Fuchter, is also the president and a
director of Proyectos Mineros S.A., situations may arise that would present a
conflict of interests, which may result in decisions disadvantageous to our
shareholders.
  Dr. Fuchter, our Chief Executive
Officer, is also the president and a director of Proyectos Mineros S.A.
(“PMSA”), the party from which we acquired our options to acquire the mining and
mineral rights in Argentina. Although the terms of some of these agreements with
PMSA were negotiated and agreed to prior to Dr. Fuchter’s appointment as Chief
Executive Officer, future situations may develop where Dr. Fuchter’s interest as
a director of PMSA conflicts with his fiduciary duties as an officer and
director of our company. Although, we will attempt to minimize or eliminate Dr.
Fuchter’s ability to influence any of our decisions affecting PMSA, including
the recusal of Dr. Fuchter from certain decisions involving PMSA, should a
conflict occur it is possible that any such conflict could be resolved in the
interests of PMSA instead of our shareholders.
 
 Because
most of our officers and directors are located outside of the United States, you
may have no effective recourse against our us or our management for misconduct
and may not be able to enforce judgment and civil liabilities against our
officers, directors, experts and agents.
  Most of our directors and officers are
nationals and/or residents of countries other than the United States, and all or
a substantial portion of such persons’ assets are located outside the United
States. As a result, it may be difficult for investors to enforce within the
United States any judgments obtained against our officers or directors,
including judgments predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof.
  Risks
Associated With Mining
 
 There
is no assurance that we can establish the existence of any mineral resource on
any of our property interests in commercially exploitable quantities. Until we
can do so, we cannot earn any revenues from operations and if we do not do so we
will lose all of the funds that we expend on exploration. If we do not discover
any mineral resource in a commercially exploitable quantity, our business will
fail.
  We have not established that any of our
properties contain any commercially exploitable mineral reserve, nor can there
be any assurance that we will be able to do so. If we do not, our business will
fail.  A mineral reserve is defined by the Securities and Exchange
Commission in its Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7)
as that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination. The probability
of an individual prospect ever having a “reserve” that meets the requirements of
the Securities and Exchange Commission’s Industry Guide 7 is extremely remote;
in all probability our mineral resource property does not contain any ‘reserve’
and any funds that we spend on exploration will probably be lost.
  Even if we do eventually discover a
mineral reserve on one or more of our properties, there can be no assurance that
we will be able to develop our properties into producing mines and extract those
resources. Both mineral exploration and development involve a high degree of
risk and few properties that are explored are ultimately developed into
producing mines.  If we do discover mineral resources in commercially
exploitable quantities on any of our properties, we will be required to expend
substantial sums of money to establish the extent of the resource, develop
processes to extract it and develop extraction and processing facilities and
infrastructure.
  
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   The
commercial viability of an established mineral deposit will depend on a number
of factors including, by way of example, the size, grade and other attributes of
the mineral deposit, the proximity of the resource to infrastructure such as a
smelter, roads and a point for shipping, government regulation and market
prices. Most of these factors will be beyond our control, and any of them could
increase costs and make extraction of any identified mineral resource
unprofitable.
  Mineral
operations are subject to applicable law and government regulation. Even if we
discover a mineral resource in a commercially exploitable quantity, these laws
and regulations could restrict or prohibit the exploitation of that mineral
resource.  If we cannot exploit any mineral resource that we might
discover on our properties, our business may fail.
  Both mineral exploration and extraction
require permits from various foreign, federal, state, provincial and local
governmental authorities and are governed by laws and regulations, including
those with respect to prospecting, mine development, mineral production,
transport, export, taxation, labor standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters. There can be no assurance that we will be able to obtain or
maintain any of the permits required for the continued exploration of our
mineral properties or for the construction and operation of a mine on our
properties at economically viable costs. If we cannot accomplish these
objectives, our business could fail.
  We believe that we are in compliance
with all material laws and regulations that currently apply to our activities
but there can be no assurance that we can continue to do so. Current laws and
regulations could be amended and we might not be able to comply with them, as
amended. Further, there can be no assurance that we will be able to obtain or
maintain all permits necessary for our future operations, or that we will be
able to obtain them on reasonable terms. To the extent such approvals are
required and are not obtained, we may be delayed or prohibited from proceeding
with planned exploration or development of our mineral properties.
  Because
our property interest and exploration activities in Argentina and Peru are
subject to political, economic and other uncertainties, situations may arise
that could have a significantly adverse material impact on us.
  Our activities in Argentina and Peru
are subject to political, economic and other uncertainties, including the risk
of expropriation, nationalization, renegotiation or nullification of existing
contracts, mining licenses and permits or other agreements, changes in laws or
taxation policies, currency exchange restrictions, changing political conditions
and international monetary fluctuations.  Future government actions
concerning the economy, taxation, or the operation and regulation of nationally
important facilities such as mines could have a significant effect on our plans
and on our ability to operate.  No assurances can be given that our
plans and operations will not be adversely affected by future developments in
Argentina and Peru.
  Because
we presently do not carry title insurance and do not plan to secure any in the
future, we are vulnerable to loss of title.
 
 We do not maintain insurance against
title on any of our properties. Title on mineral properties and mining rights
involves certain inherent risks due to the difficulties of determining the
validity of certain claims as well as the potential for problems arising from
the frequently ambiguous conveyance history characteristic of many mining
properties. Disputes over land ownership are common, especially in the context
of resource developments. We cannot give any assurance that title to such
properties will not be challenged or impugned and cannot be certain that we will
have or acquire valid title to the mining and mineral rights on such properties.
The possibility also exists that title to existing properties or future
prospective properties may be lost due to an omission in the claim of title. As
a result, any claims against us may result in liabilities we will not be able to
afford, resulting in the failure of our business.
 
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  Because
we are subject to various governmental regulations and environmental risks, we
may incur substantial costs to remain in compliance.
  Our activities in Argentina and Peru
are subject to federal and local laws and regulations regarding environmental
matters, the abstraction of water, and the discharge of mining wastes and
materials. Any significant mining operations will have some environmental
impact, including land and habitat impact, arising from the use of land for
mining and related activities, and certain impact on water resources near the
project sites, resulting from water use, rock disposal and drainage
run-off.  No assurances can be given that such environmental issues
will not cause our operations in the future to fail.
  The federal and/or local government in
Argentina and Peru could require us to remedy any negative environmental impact.
The costs of such remediation could cause us to fail.  Future
environmental laws and regulations could impose increased capital or operating
costs on us and could restrict the development or operation of any
mines.
  We have, and will in the future, engage
consultants to assist us with respect to our operations in Argentina and
Peru.  We are beginning to address the various regulatory and
governmental agencies, and the rules and regulations of such agencies, in
connection with the options for the properties in Argentina and
Peru.  No assurances can be given that we will be successful in our
efforts.  Further, in order for us to operate and grow our business in
Argentina and Peru, we need to continually conform to the laws, rules and
regulations of such country and local jurisdiction.  It is possible
that the legal and regulatory environment pertaining to the exploration and
development of mining properties will change.  Uncertainty and new
regulations and rules could dramatically increase our cost of doing business, or
prevent us from conducting its business; both situations could cause us to
fail.
  Mineral
exploration and development is subject to extraordinary operating risks. We do
not currently insure against these risks. In the event of a cave-in or similar
occurrence, our liabilities may exceed our resources, which could cause our
business to fail.
  Mineral exploration, development and
production involves many risks which even a combination of experience, knowledge
and careful evaluation may not be able to overcome. Our operations will be
subject to all the hazards and risks inherent in the exploration, development
and production of resources, including liability for pollution, cave-ins or
similar hazards against which we cannot insure or against which we may elect not
to insure. Any such event could result in work stoppages and damage to property,
including damage to the environment. We do not currently maintain any insurance
coverage against these operating hazards. The payment of any liabilities that
arise from any such occurrence could cause us to fail.
  Mineral
prices are subject to dramatic and unpredictable fluctuations.
  We expect to derive revenues, if any,
from the extraction and sale of precious and base metals such as gold and
silver. The price of those commodities has fluctuated widely in recent years,
and is affected by numerous factors beyond our control including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of base and precious metals, and, therefore, the economic
viability of any of our exploration projects, cannot accurately be
predicted.
  The
mining industry is highly competitive and there is no assurance that we will
continue to be successful in acquiring property interests. If we cannot continue
to acquire interests in properties to explore for mineral resources, we may be
required to reduce or cease operations.
  The mineral exploration, development,
and production industry is largely unintegrated. We compete with other
exploration companies looking for mineral resource properties. While we compete
with other exploration companies in the effort to locate and license mineral
resource properties, we will not compete with them for the removal or sales of
mineral products from our properties if we should eventually discover the
presence of them in
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   quantities
sufficient to make production economically feasible. Readily available markets
exist worldwide for the sale of gold and other mineral products. Therefore, we
will likely be able to sell any gold or mineral products that we identify and
produce.
  We compete with many companies
possessing greater financial resources and technical facilities. This
competition could adversely affect our ability to acquire suitable prospects for
exploration in the future as well as our ability to recruit and retain qualified
personnel. Accordingly, there can be no assurance that we will acquire any
interest in additional mineral resource properties that might yield reserves or
result in commercial mining operations.
 
 Risks
Relating to our Common Stock
 
 Trading on the over-the-counter
bulletin board may be volatile and sporadic, which could depress the market
price of our common stock and make it difficult for our stockholders to resell
their shares.
  Our
common stock is quoted on the over-the-counter bulletin board service of the
Financial Industry Regulatory Authority (the “OTCBB”).  Trading in
stock quoted on the OTCBB is often thin and characterized by wide fluctuations
in trading prices, due to many factors that may have little to do with our
operations or business prospects.  This volatility could depress the
market price of our common stock for reasons unrelated to operating
performance.  Moreover, the OTCBB is not a stock exchange, and trading
of securities on the OTCBB is often more sporadic than the trading of securities
listed on a quotation system like Nasdaq or a stock exchange like
Amex.  Accordingly, shareholders may have difficulty reselling any of
the shares.
  Because
our common stock is quoted and traded on the OTCBB, short selling could increase
the volatility of our stock price.
  Short
selling occurs when a person sells shares of stock which the person does not yet
own and promises to buy stock in the future to cover the sale.  The
general objective of the person selling the shares short is to make a profit by
buying the shares later, at a lower price, to cover the
sale.  Significant amounts of short selling, or the perception that a
significant amount of short sales could occur, could depress the market price of
our common stock. In contrast, purchases to cover a short position may have the
effect of preventing or retarding a decline in the market price of our common
stock, and together with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of our common stock.  As
a result, the price of our common stock may be higher than the price that
otherwise might exist in the open market.  If these activities are
commenced, they may be discontinued at any time.  These transactions
may be effected on the OTCBB or any other available markets or
exchanges.  Such short selling if it were to occur could impact the
value of our stock in an extreme and volatile manner to the detriment of our
shareholders.
  We
may experience difficulties in the future in complying with Sarbanes-Oxley
Section 404.
  We are
required to evaluate our internal controls under Section 404 of the
Sarbanes-Oxley Act of 2002.  Beginning with our annual report on Form
10-K for the fiscal year ending December 31, 2009, we will be required to
furnish a report by our management on our internal control over financial
reporting.  Such report contains among other matters, an assessment of
the effectiveness of our internal control over financial reporting as of the end
of our fiscal year, including a statement as to whether or not our internal
control over financial reporting is effective.
  If we
fail to maintain proper and effective internal controls in future periods, it
could adversely affect our operating results, financial condition and our
ability to run our business effectively and could cause investors to lose
confidence in our financial reporting.
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  We
have never paid dividends and have no plans to in the foreseeable
future.
  Holders
of shares of our common stock are entitled to receive such dividends as may be
declared by our board of directors.  To date, we have paid no cash
dividends on our shares of common stock and we do not expect to pay cash
dividends on our common stock in the foreseeable future.  We intend to
retain future earnings, if any, to provide funds for operation of our
business.  Therefore, any return investors in our common stock will
have to be in the form of appreciation, if any, in the market value of their
shares of common stock.
  We
have additional securities available for issuance, which, if issued, could
adversely affect the rights of the holders of our common stock.
  Our Articles of Incorporation
authorize the issuance of 300,000,000 shares of our common stock and 50,000,000
shares of preferred stock.  The common stock or preferred stock can be
issued by our board of directors, without stockholder approval.  Any
future issuances of our common stock would further dilute the percentage
ownership of our common stock held by public stockholders.
 
 Because
the SEC imposes additional sales practice requirements on brokers who deal in
our shares that are penny stocks, some brokers may be unwilling to trade them.
This means that you may have difficulty in reselling your shares and may cause
the price of the shares to decline.
 
 Our stock is a penny stock. The
Securities and Exchange Commission has adopted Rule 15g-9 which generally
defines “penny stock” to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny
stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations and the broker-dealer and salesperson
compensation information must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
 
 In addition to the “penny stock” rules
promulgated by the Securities and Exchange Commission, FINRA has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative, low-priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low-priced securities
will not be suitable for at least some customers. The FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our
stock.
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 Indemnification
of officers and directors.
  Our
articles of incorporation and the bylaws contain broad indemnification and
liability limiting provisions regarding our officers, directors and employees,
including the limitation of liability for certain violations of fiduciary
duties.  Our stockholders therefore will have only limited recourse
against such individuals.
  ITEM 1B.    Unresolved Staff
Comments.
  None.
  ITEM 2. Properties.
  Description
of our Mineral Property Interests
  Our properties are located in Argentina
and Peru and all are in the exploration stage.  These properties are
without known reserves and the proposed plan of exploration detailed below is
exploratory in nature.  The individual properties are described
below.
  Atena
Property
 
 On December 12, 2007, we entered into
an assignment agreement with Proyectos Mineros S.A. (“PMSA”) (formerly Recursos
Maricunga S.A.) to acquire PMSA’s right to explore and an option (the “Atena
Option”) to purchase certain mineral rights on properties known as the Atena
Gold Project (“Atena”) located in the Salta Province of Argentina (the “Atena
Property”).  The Atena Property consists of an aggregate 3,676
hectares.  PMSA acquired its right to explore and the Atena Option to
purchase the mineral rights to these properties from Rio Tinto Mining &
Exploration Ltd., Argentine Branch.
 
 The mineral rights on the Atena
Property consist of mining claims referred to in Argentina as “minas” which
remain valid so long as the annual fee referred to as “canon minero” is
paid.
 
 Pursuant to the terms of the assignment
agreement, we have issued to PMSA 1,500,000 shares of our common stock and paid
PMSA $60,000.  We will acquire 100% of this Atena Option if we incur a
minimum of an additional $3,500,000 in work commitment expenditures on the Atena
Property (the “Atena Expenditures”) and issue 6,000,000 shares of our common
stock to PMSA in accordance with the following schedule:
 
 ·
              $500,000
      in Atena Expenditures, plus an additional issuance of 2,000,000 shares of
      our common stock on or before March 15,
2009;
 ·
              an
      additional $1,000,000 payment in Atena Expenditures, plus a further
      issuance of 4,000,000 shares of our common stock on or before March 15,
      2010; and
 ·
              a
      final $2,000,000 payment in Atena Expenditures on or before March 15,
      2011.
 
 As of
March 15, 2009, we had not issued the 2,000,000 shares of our common stock nor
incurred $500,000 in Atena Expenditures as required under the Assignment
Agreement in order to be able to exercise the Atena
Option.    PMSA agreed to waive the obligation that we incur
$500,000 in Atena Expenditures by March 15, 2009 contingent upon our issuance to
PMSA of  the 2,000,000 shares of our common stock as required under
the Assignment Agreement by March 31, 2009.
 
 We will acquire 100% of the Atena
Option once we have completed our commitments under the Atena Expenditures and
issued shares of our common stock to PMSA, as set forth above, on or before
March 15, 2011.  Following the completion of this acquisition and
payment of the consideration set forth above, we will grant to PMSA a 1% net
smelter returns royalty.  The Atena Option grants us the exclusive
possession of the properties for mineral exploration, together with the right to
purchase the minerals rights to these properties upon exercise of the Atena
Option.
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  Recent
Exploration Work and Proposed Exploration Program
 
 A Phase 1 exploration program was
completed on the Atena Property in February 2008.  During this phase,
field geologists collected composite samples approximately every 50 metres along
the entire-36 kilometre vein system on the project area.  The samples were
sent to ALS Chemex, the South American division of the ALS Laboratory Group, for
analysis.  Results of these samples indicated an anomalous area of
approximately five kilometres by three kilometres,  which is the subject of
follow-up exploration in a Phase 2 program.  The Phase 2 program comprises
of trenching and detailed sampling, as well as detailed geological
mapping.  These activities are expected to outline the shape and tenor
of pay shoots which can then be tested in the subsurface by diamond drilling in
a Phase 3 program.  While the project area lies at 3900m above sea
level in the altiplano or puna of northwest Argentina, fieldwork can be
conducted all year-round.  The Phase 2 program has commenced and a
trenching contract has been granted to a Salta-based operator to undertake the
work.  Phase 2 is expected to be completed by March 2009, after which
the Phase 3 drilling program is anticipated to commence.
 
 Our anticipated exploration expenses at
the Atena Project for the next twelve months are as follows:
 
 Activity
                          USD
  000sPHASE
      2 - FOLLOW-UP EXPLORATION:Mineral
      Property Maintenance
                          4Permitting
                          1Geological
      Mapping
                          5Trenching
                          35Analytical
      Costs
                          30Field
      Expenses
                          15Personnel
                          35Consultants
                          15Transport
                          20Travel
                          5Subtotal
                          165PHASE
      3 - FIRST STAGE DRILLING (TARGET TESTING)Mineral
      Property Maintenance
                          4Permitting
                          1Drilling
      (2000 m)
                          200Drilling
      Support
                          30Analytic
      Costs
                          30Field
      Expenses
                          15Personnel
                          35Transport
                          15Travel
                          20Miscellaneous
                          5Subtotal
                          355TOTAL
                          520
 
 Amira,
Amira Norte and Esparta II Properties
 
 Effective March 17, 2008, we entered
into an assignment agreement, dated March 17, 2008, with PMSA, whereby PMSA
assigned to us PMSA’s right to explore and an option (the “Amira-Esparta
Option”) to purchase a 90% interest in the mineral rights of three mining
properties referred to as “Amira”, “Amira Norte” and “Esparta II”, located in
the Province of Salta, Argentina (the “Amira-Esparta
Properties”).  Pursuant to the terms of our agreement with PMSA, PMSA
has assigned to us all of PMSA’s rights and obligations under an option
agreement by and between PMSA and the registered titleholder to the
Amira-Esparta Properties, Ms. Silvia Rene Rodriguez, in consideration of our
recognizing to PMSA a 1% net smelter returns royalty on the Amira-Esparta
Properties.  The mineral rights underlying the Amira-Esparta
Properties consist of manifestations of discovery (referred to
as
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  “manifestciones
de descubrimientos”), which are a form of mineral title that allows the
conversion of exploration concessions (referred to as “cateos”)to
mining claims (referred to as “minas”). The manifestations of discovery are used
as a basis for location of mining claims, but do not have a definite area until
the claims are proposed.  Within a period following designation of a
manifestation of discovery, the claimant may do further exploration, if
necessary, to determine the size and shape of the ore body.   All of
these forms of mineral title require the payment of an annual fee referred to as
“canon minero.”  In order for us to keep our interest in good standing
and to exercise the Amira-Esparta Option, we must make the following payments to
Ms. Rodriguez, as set forth in the underlying option agreement:
 
 ·
              $75,000
      on or before January 19, 2009;
 ·
              an
      additional payment of $150,000 on or before January 19,
    2010;
 ·
              an
      additional payment of $200,000 on or before January 19, 2011;
      and
 ·
              a
      final payment of $1,000,000 on or before January 19, 2012, which shall
      also be the final payment required and such payment will cause the
      Amira-Esparta Option to have been automatically
  exercised.
 
 As of
January 19, 2009, we had not paid Ms. Rodriguez the $75,000 payment required in
order to be able to exercise the Amira-Esparta
Option.    Ms. Rodriguez has agreed to modify the payment
terms for this payment.  As a result of this modification to the
payment terms, we are now required to pay Ms. Rodriguez $25,000 on or before
April 1, 2009 and $50,000 on or before June 19, 2009 in order to satisfy this
obligation.
 
 Geology
and Mineralization
  The Atena project is located within the
Sierra de Taca Taca range approximately 15 kilometers from the Taca Taca
porphyry deposit. The Sierra de Taca Taca range is mostly underlain by
granodiorites of the Taca Taca Formation of Ordovician age with early Permian
rhyolite and andesite volcanic and volcaniclastics dominating the western
portions of the range.
  Oligocene subvolcanic porphyry
intrusions commonly intrude these older units. Some of these are associated with
hydrothermal porphyry-style mineralization such as is found at Taca Taca. In
addition, quartenary basaltic centers, such as Mt Aracar which covers the
western margin of the Atena project area, as well as rhyolite domes are also
observed within the district.
  The project area itself is largely
underlain by biotite monzogranite with common enclaves of mafic-rich
granodiorite porphyry. These rocks have been extensively intruded by pink aplite
and pegmatite sills which give large outcrop areas a banded/bedded appearance.
The granitoids are also cut by meter-wide lamprophyre dikes which are assumed to
be tertiary in age.
  Across the project area there are
numerous vein sets and discrete lode zones that consist of multiple anastomozing
lodes and link structures. The lode zones form in Northward-trending principle
shears, northwest secondary shears, and northeast tension veins, and form a
brittle shear array with a sinistral strike-slip component and as yet uncertain
dip-slip component. There is a distinctive gray clay-chlorite-carbonate
alteration in the partly sheared rock between the branches of the lodes that
makes that area recessive relative to unaltered granitoids.
  The lodes have a variety of components
the proportions of which vary according to lode thickness and orientation. The
components are:
  ·
              sheared
      host rock with hematite-clay-chlorite alteration typical of the granite
      and fine silica-hematite alteration in the aplite and
      lamprophyre;
  ·
              brown
      iron-manganese-magnesium-calcium carbonate that forms a matrix, patches,
      veins and breccia fill in the shear zones. The most common form in the
      shear lodes is a banded rock with altered host rock lenses and infill
      carbonate that is massive and crystalline. There is also a breccia with
      the same components and veins with comb-textured coarse carbonate
      crystals;
   - 27
-
 Table of Contents
   ·
              clear
      microcrystalline quartz veins and pods lying in the shear zones and
      dominating them locally. Variations on this quartz are: a gray shear
      textured overprint with very fine-grained sulfides; a mustard green
      overprint due to scorodite generally in breccia zones in the quartz and
      interpreted as oxidised arsenic-sulfides. This is not to be confused with
      silver-green sericite alteration of feldspars in the granitoids near the
      shear zones;
  The main set of northward-trending
shears are dominated by shear , silica-hematite, carbonate and quartz, the
northwest lodes are shears with some silica-hematite and minor carbonate and the
northeast lodes are dominantly quartz vein.
  In some
pits along the northward-trending lodes malachite stain and orange-yellow
jarosite-limonite boxworks after sulfides have been observed.  This
staining generally coincides with segments of these lodes which contain
noticeable, but not dominant, quartz infill.  There are also oxides
after carbonate in such lodes but it is dominantly black-brown manganese
oxide-limonite.  In the quartz dominated northeast-trending lodes,
there are distinct domains with green scorodite stain and local
jarosite-limonite stain.  These tend to be associated with the sheared
or brecciated part of the microcrystalline quartz where there is recognizable
gray sulfidic shears or infill in the quartz as well.  Since the
sulfide/sulfate/oxide points tend to have the best grade in the existing sample
set it is inferred that sulfides in the quartz-bearing part of the lodes define
shoots that have the better chance of gold mineralization.
  Certain
metal associations have been recognized from the results of the sampling
programs, in particular those of Au-Ag-Bi-Pb and Cu-Ag-As.  The former
association is typical of shallow and the latter of intermediate level
hydrothermal mineralization related to intermediate (e.g,, dacitic
magma).  This is consistent with the spatial association of the
biotite lamprophyre dikes in the same structures as the lode and the common
alteration types associated with dike and lode.  It is therefore
possible, but not essential, that there is porphyry Cu-Mo-Au mineralisation in
the deeper part of this system.  So far, apart from the relationships
already noted, there is no direct evidence for related porphyry mineralisation
like that at Taca Taca.  However, at Taca Taca there are
quartz-sulfide lodes similar to those at Atena that lie in northward-trending
shears that overprint the more widespread fracture and veinlet controlled
Cu-Mo-Au mineralization.
  Proposed
Exploration Program
 
 The Amira-Esparta Properties located in
the province of Salta, Argentina, are located in close proximity to our
interests discussed above under the subheading “Atena Property” and together
these properties form a part of a mining project referred to as the “Atena
Project.”  The location and scope of our exploration program
activities on the Atena Property will be extended to also include the
Amira-Esparta Properties.
 
 Location
and Access
 
 The Atena Project covers an area of
some 9,281 hectares in the "puna" (altiplano) of Salta Province in northwestern
Argentina approximately 350km from the provincial capital. The project lies at
3,700 meters above sea level.  Access to the property is by provincial
roads from the town of Tolar Grande to Taca  Taca.
    - 28
-
 Table of Contents
  The following map shows the general
location of the Atena Property (labeled Atena I and Atena II) and the
Amira-Esparta Properties (labeled Amira, Amira Norte and Esparta
II):
  
  Previous
Exploration History
  The veins at the Atena Project were
first discovered in the mid 1950s by a prospector from Salta who opened up a few
trenches and pits on Cu-oxide showings on some of the quartz veins.
  The vein system was then rediscovered
by RTZ Mining & Exploration Argentina Branch (“RTZ”) during their porphyry
and epithermal gold exploration campaign in the northwestern portion of
Argentina in 2003. RTZ undertook three campaigns over the Atena property,
starting with a reconnaissance sampling program of the veins (26 samples) which
was followed-up by a further 152 grab samples. In addition, some 118 samples
were taken from a number of shallow trenches. Grab samples by RTZ returned up to
8.9g/t Au.
  When RTZ decided to get out of
epithermal gold exploration, the exploration-with-option-to-purchase rights over
Atena Property were acquired by Proyectos Mineros, a privately-owned Argentine
exploration company. Proyectos Mineros subsequently acquired the additional
property comprising the Aetna Project and these properties interest and
agreements with all the underlying rights and obligations that have been
assigned to us.
 
  - 29
-
 Table of Contents
  Cerro
Amarillo Property
 
 On January 8, 2008, we entered into an
assignment agreement with PMSA to acquire PMSA’s right to explore and option
(the “Cero Amarillo Option”) to purchase certain mineral rights on properties
known as the Cerro Amarillo Property located in the Departamento Malargue,
Province of Mendoza, Argentina (the “Cerro Amarillo Property”).  The
Cerro Amarillo Property consists of an aggregate 14,221.7 hectares.
 
 The mineral rights underlying the Cerro
Amarillo Property consist of manifestations of discovery (referred to as
“manifestciones de descubrimientos”), which are a form of mineral title that
allows the conversion of exploration concessions (referred to as “cateos”)to
mining claims (referred to as “minas”). The manifestations of discovery are used
as a basis for location of mining claims, but do not have a definite area until
the claims are proposed.  Within a period following designation of a
manifestation of discovery, the claimant may do further exploration, if
necessary, to determine the size and shape of the ore body.   All of
these forms of mineral title require the payment of an annual fee referred to as
“canon minero.”
 
 
 Pursuant to the terms of the assignment
agreement, we issued to PMSA 300,000 shares of our common stock and paid PMSA
$10,000 in July 2008.  We will acquire 100% of the Cerro Amarillo
Option if we incur a minimum of $450,000 in work commitment expenditures on this
property (the “Cerro Amarillo Expenditures”) and issue 2,100,000 shares of our
common stock to PMSA in accordance with the following schedule:
 
 ·
              $200,000
      in Cerro Amarillo Expenditures, plus a further issuance of 300,000 shares
      of our common stock on or before January 8,
  2009;
 ·
              an
      additional $250,000 payment of Cerro Amarillo Expenditures, plus a further
      issuance of 600,000 shares of our common stock on or before January 8,
      2010;
 ·
              an
      additional issuance of 600,000 shares of our common stock on or before
      January 8, 2011; and
 ·
              a
      final issuance of 600,000 shares of our common stock on or before January
      8, 2012.
 
 As of
January 8, 2009, we had not issued the 300,000 shares of our common stock nor
incurred $200,000 in Cerro Amarillo Expenditures as required under the
assignment agreement in order to be able to exercise the Cerro Amarillo
Option.  PMSA agreed to waive the obligation that we incur $200,000 in
Cerro Amarillo Expenditures by January 8, 2009, contingent upon our issuance to
PMSA of the 300,000 shares of our common stock as required under the Assignment
Agreement by March 31, 2009.
 
 If we exercise the Cerro Amarillo
Option to acquire 100% of the Cerro Amarillo Property, then we must issue an
additional 3,000,000 shares of our common stock to PMSA.  The Cerro
Amarillo Option is subject to a 1% net smelter returns royalty on the Cerro
Amarillo Property in favor of the underlying titleholder.  The Cerro
Amarillo Option contains certain work expenditure obligations, which are
intended to be satisfied by the Cerro Amarillo Expenditures.
 
 Location
and Access
  The Cerro Amarillo Property is situated
in the southern Mendoza Province of Argentina near the ski resort of Las
Leñas.  The Cerro Amarillo Property consists of approximately 14,222
hectares and is located at a latitude of 35° 16’ 25” S and a longitude of 70°
09’ 22” approximately 25 kilometers due east of the Chilean border. This
property lies at an elevation of about 3,400 meters above sea level in the
foothills of the Cordillera. Access is a few minutes by helicopter or a four
hour ride on horseback from the Las Leñas resort, situated 15 kilometers to the
northeast.
   - 30
-
 Table of Contents
  The following map shows the general
location of the Cerro Amarillo Property:
  
 
 Previous
Exploration History
  The Cerro Amarillo Property was
discovered by Minera Aguilar (St. Joe Minerals) in 1970 as part of an
exploration program to follow-up on stream geochemistry. Work carried out on the
Cerro Amarillo Property since its discovery is as follows:
  ·
              1970
      –1973 St. Joe Minerals undertook geological mapping, surface geochemical
      sampling, and geophysical surveying (27km of Induced Polarization or IP)
      of the Cerro Amarillo colour
anomaly.
  ·
              1994
      – 1995 Solitario carried out further rock geochemistry and additional
      geological reconnaissance.
  ·
              1995
      – 1996 Phelps Dodge undertook thin section petrography, reconnaissance
      mapping, and limited rock chip sampling of the Cajon Grande
      anomaly.
  - 31
-
 Table of Contents
   ·
              1996
      – 1997 BHP carried out further rock chip sampling of Cerro Amarillo
      anomaly.
  ·
              1998
      Billiton undertook a magnetic survey over the Cerro Amarillo anomaly
      (22km) in addition to confirmatory and orientation
      geochemistry.
  ·
              1999
      IMA repeated two of the St. Joe Minerals IP
  lines.
  ·
              2001
      OreGalore undertook a major compilation of all existing
    data
  ·
              2003
      Xstrata completed further reconnaissance-style mapping of the Cerro
      Amarillo Property. In addition, they collected another 30 grab samples,
      flew some 500 line kilometers of helicopter-borne magnetics, and recorded
      4.2 km of dipole-dipole IP data along three lines over the mineralized
      zone of Cerro Amarillo Property.
  ·
              2006
      – 2007 Latin American Minerals held an option on the property but
      conducted little work during their
tenure.
  Geology
and Mineralization
 
 Cerro
Amarillo is located at the southern end of the highly productive Late Miocene –
Pliocene magmatic arc that hosts the El Teniente and Los Bronces porphyry giants
in Chile.  It forms part of a cluster of intrusions of different age
and composition associated with a 60 kilometer long north to northeast-trending,
arcuate thrust fault known as the Las Leñas fault.  This fault is
considered to have formed in Permian to Triassic times and to have been
reactivated under a compressive regime during the Miocene.  The
intrusions include large, six kilometer by four kilometer, barren bodies of
equigranular granodiorite as well as smaller stocks of mostly tonalitic porhyry
with which the two known porphyry occurrences as well as the several colour
anomalies are associated.
  Cerro
Amarillo Occurrence
 
 Our
mapping demonstrated that the Cerro Amarillo prospect contains a classical
porphyry system that includes stockwork-, disseminated-, skarn-, breccia- and
vein-styles of mineralization.  The system is centered on a quartz
rich dioritic porphyry plug approximately 300 meter in diameter. The plug is
enclosed within a 600 by 900 meter shell of hydrothermal
breccia.  This system intrudes a sequence of Permo-Triassic dacitic
volcanics, Jurassic calcareous sediments and younger andesitic
volcanics.  There are distinct unconformities between each of the
three formations.  All of the formations have shallow westerly
dips.  The alteration system is zoned in a similar way to many
classical porphyry deposits . The core porphyry is overprinted by strong
magnetite-quartz-biotite "potassic" alteration.  The enclosing breccia
is overprinted by strong sericite-quartz-pyrite "phyllic"
alteration.  Adjacent calcareous sediments have developed skarn
alteration out to a radius of several hundred metres.  Volcanics and
some sediments outside the skarn have developed extensive albite-pyrite
alteration mineralization styles at Cerro Amarillo are also
zoned.  The central porphyry plug contains abundant "A" type
quartz-magnetite stockworks.  Chalcopyrite occurs in the stockworks
and disseminated in the altered intrusive.  Fresh sulphides are
visible at surface.  Consequently, the supergene zone is likely to be
thin and poorly developed.  However, within the surrounding
hydrothermal breccia zone, deep weathering and abundant pyrite may result in an
excellent supergene trap for copper and gold leached from the central porphyry
and the breccia itself.  The skarns occur in an almost perfect ring at
the intersection between vertical cylinder of breccia and the shallow dipping
calcareous sediments.  At the current level of erosion, almost the
entire ring is exposed at surface.  Garnet skarns are most abundant
with lesser amounts of epidote, sulphide, hematite and
magnetite.  Sparse peripheral veins containing barite, hematite,
galena and sphalerite occur out to a radius of approximately one kilometer from
the centre of the system.  Previous samples have appeared to suggest
these veins may contain high gold grades, but their volume is
limited.  Ground magnetics and alteration patterns suggest that there
is potential for the system to enlarge with depth.
   - 32
-
 Table of Contents
  Cajon
Grande Occurrence
 
 Cajon Grande contains a centre of
porphyry style mineralization with an intense stockwork of
magnetite-actinolite-garnet veins and a small amount of skarn. However, Cu-Au
mineralization is weakly developed. A series of peripheral siderite-barite-base
metal veins may contain high silver or gold values, but they are too small and
widely spaced to be of economic interest. However, a 50 meter wide zone of
hydrothermal breccia with open space filling provides us with a significant
target.
 
 Colour
Anamalies (Alteration Zones)
 
 The C2 anomaly covers a one kilometer
diameter diatreme breccia that cuts through the same stratigraphy as Cerro
Amarillo. The pipe may be a feeder vent for some of the Jurassic andesite
volcanics. The breccias and surrounding sediments are only weakly altered. Only
traces of copper mineralization have been observed within the pipe.
 
 The Dead Cow anomaly is probably part
of a porphyry style mineralization system. The area includes a variety of
porphyries tuffs and sediments. The rocks are affected by phyllic and albite
alteration and minor skarn alteration. No significant mineralization was
observed in the visited parts, but some sparse magnetite stockworks near the
western margin warrant further investigation. The skarn volume is too small to
be of interest and the phyllic/albite altered rocks appear
un-mineralized.
 
 Recent
Exploration Work and Proposed Exploration Program
 
 The Cerro Amarillo Property is untested
property that has drill targets indicated by geophysics, as well as a number of
other unexplored prospective areas.  Although a number of drill targets
have been outlined by previous work, recent exploration work involved
additional exploration by detailed mapping and sampling on the whole of the
Cerro Amarillo Property, as well as the region with a view to identifying
additional drill targets before undertaking a first stage drill program. 
In addition, some ten kilometer of access road will be constructed in
anticipation of the drill program.
  With respect to the timeframe,
fieldwork can be conducted for approximately nine months of each year at the
Cerro Amarillo Property, which lies in a snow belt.  Because of the
onset of the austral winter and the occurrence of significant snow, the drilling
can only commence in the spring and summer seasons.
 
 In February 2008, we commenced
exploration on the Cerro Amarillo Property in Mendoza, Argentina.  The
Phase 1 program, designed to further identify trench and drill targets,
comprises detailed mapping and sampling together with ground magnetic
surveying.   We have established a camp on the Cerro Amarillo
Property from which exploration activities will be conducted.  An
international geological consultant, supported by local geologists and field
technicians, leads this project, which was completed in eight
weeks.
 
 The detailed mapping confirmed that the
Cerro Amarillo Property occurrences contain a classical porphyry-style
mineralized system that includes stockwork, disseminated, breccias, skarn, and
vein-types of mineralization.  These types of mineralization are zoned with
a central porphyry plug containing vein stockworks together with disseminated
mineralization  This plug is surrounded by mineralized hydrothermal
breccias (shattered rock) with abundant pyrite that may result in an excellent
supergene trap for leached copper and gold.  Skarn replacement
mineralization occurs in almost a perfect ring at the intersection of the
vertical cylinder of breccias and the shallow-dipping calcareous sedimentary
sequence.  At the current level of erosion, almost the entire ring is
exposed.  Sparse peripheral veins occur out to a radius of approximately
one kilometer.  The unique level of exposure of this system could
potentially allow the core stockwork-disseminated mineralization, the supergene
breccias, and the skarns to be extracted in a single open-pit with a very low
stripping ratio.
 
 The second phase is expected to commence
in either September of October of 2009 upon granting of a permit for the
construction of a drill road up to the prospect.  In addition to
building the access road, an exploration camp will be established on the
property and the first 1000 meters of a 3000 meter drill program will be carried
out to test the drill targets on the Cerro Amarillo Property.  The
remaining 2000 meters of drilling is expected to be completed in early in
2010.
  - 33
-
 Table of Contents
  Our anticipated exploration expenses at
the Cerro Amarillo Project for the next twelve months are as
follows:
 
 Activity
                          USD
  000sACCESS
      ROAD:Contractor
      Costs
                          55Field
      Expenses
                          5Personnel
                          15Transport
                          5Travel
                          5Subtotal
                          85CAMP
      ESTABLISHMENTEquipment
                          15Logistics
                          5Field
      Expenses
                          5Personnel
                          5Transport
                          3Travel
                          2Subtotal
                          35FIRST
      STAGE DRILLING (TARGET TESTING)Property
      Maintenance Costs
                          4Permitting
                          1Drill
      Pad Construction
                          20Drilling
      (1000m of 3000m program)
                          110Drilling
      Support
                          20Analytical
      Costs
                          20Field
      Expenses
                          15Personnel
                          20Consultants
                          35Transport
                          5Travel
                          5Subtotal
                          255TOTAL
                          375
 
 Peruvian
Gold Sands Property
  On
September 29, 2008 (the “Effective Date”), we entered into a Mineral Right
Option Agreement (the “Option Agreement”) with Temasek Investments Inc.
(“Temasek”), a company incorporated under the laws of Panama in relation to the
Peru property.  Pursuant to the Option Agreement, we acquired four
separate options from Temasek, each providing for the acquisition of a
twenty-five percent interest in certain mineral rights in Peru described in
Annex 1 of the Option Agreement (the “Mineral Rights”) pursuant to which we
could potentially acquire one hundred percent of the Mineral
Rights.  The Mineral Rights are owned by Compañía Minera Marañón
S.A.C. (“Minera Marañón”).  Bacon Hill Invest Inc. (“Bacon Hill”), a
corporation incorporated under the laws of Panama and a wholly-owned subsidiary
of Temasek, owns 999 shares of the 1,000 shares of Minera Marañón that are
issued and outstanding.  Temasek owns the single remaining share of
Minera Marañón.  The acquisition of each twenty-five percent interest
in the Mineral Rights will occur through the transfer to us of twenty-five
percent of the outstanding shares of Bacon Hill.
  - 34
-
 Table of Contents
 A description of the Mineral Rights is
set forth below:
 Name
                    Area
                    Dept.
                    Province
                    District
                    ObservationAixa
      2
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheAlana
      10
                    900
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      11
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      12
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      13
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      14
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      15
                    800
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      16
                    800
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      17
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      18
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      19
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      4
                    900
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      5
                    700
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      6
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      7
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      8
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPAlana
      9
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Fully
      overlap Zona de Amortiguamiento ANPBianka
      5
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheCastalia
      1
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheCastalia
      2
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheCastalia
      3
                    500
                    Loreto
                    Datem
      del Marañon
                    MansericheDelfina
      1
                    900
                    Amazonas
                    Condorcanqui
                    Nieva
                    Partially
      overlap Zona de Amortiguamiento ANPDelfina
      2
                    900
                    Amazonas
                    Condorcanqui
                    Nieva
                    Partially
      overlap Zona de Amortiguamiento ANPDelfina
      3
                    1000
                    Amazonas
                    Condorcanqui
                    Nieva
                    Partially
      overlap Zona de Amortiguamiento ANPDelfina
      4
                    700
                    Amazonas
                    Condorcanqui
                    Nieva
                    Partially
      overlap Zona de Amortiguamiento ANPDelfina
      5
                    1000
                    Amazonas
                    Condorcanqui
                    Nieva
                    Partially
      overlap Zona de Amortiguamiento ANPMika
      1
                    600
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      10
                    900
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Partially
      overlap Zona de Amortiguamiento ANPMika
      2
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      3
                    900
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      4
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      5
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      6
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      7
                    900
                    Loreto
                    Datem
      del Marañon
                    MansericheMika
      8
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
                    Partially
      overlap Zona de Amortiguamiento ANPMika
      9
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheRosalba
      1
                    900
                    Loreto
                    Datem
      del Marañon
                    MansericheRosalba
      2
                    900
                    Loreto
                    Datem
      del Marañon
                    MansericheRosalba
      3
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheRosalba
      4
                    1000
                    Loreto
                    Datem
      del Marañon
                    MansericheRosalba
      5
                    1000
                    Loreto
                    Datem
      del Marañon
                    Manseriche
      - Barranca
 We may exercise the initial
twenty-five percent option, which provided for the acquisition of a twenty-five
percent interest in the Mineral Rights, after fulfilling the following
conditions:
  · payment
of $375,000 to Temasek upon execution of the Option
Agreement;
 · issuance
of 2,000,000 shares of our common stock to Temasek within five business days
from the Effective Date; and · payment
of an additional $375,000 to Temasek within ninety days of the Effective
Date.
  Since the execution of the Option
Agreement, we have paid a total of $750,000 and issued 2,000,000 shares of our
common stock to Temasek in accordance with the terms of the Option Agreement and
completed the acquisition of the initial twenty-five percent option, which
provided for the acquisition of a twenty-five percent interest in the Mineral
Rights.
  - 35
-
 Table of Contents
  We may exercise the second twenty-five
percent option, resulting in our acquisition of a fifty percent interest in the
Mineral Rights, after fulfilling the following conditions within six months of
the Effective Date:
  ·
              payment
      of an additional $1,250,000 to Temasek,
and
  ·
              issuance
      of 2,000,000 additional shares of our common stock to
    Temasek.
  We may exercise the third twenty-five
percent option, resulting in our acquisition of a seventy-five percent interest
in the Mineral Rights, after fulfilling the following conditions within twelve
months of the Effective Date:
  ·
              payment
      of an additional $3,000,000 to Temasek,
and
  ·
              issuance
      of 2,000,000 additional shares of our common stock to
    Temasek.
  We may exercise the fourth twenty-five
percent option, resulting in our acquisition of a one hundred percent interest
in the Mineral Rights, after fulfilling the following conditions within eighteen
months of the Effective Date:
  ·
              payment
      of an additional $5,000,000 to Temasek,
and
  ·
              issuance
      of 4,000,000 additional shares of our common stock to
    Temasek.
  Upon our acquisition of a 100% interest
in the Mineral Rights, Temasek will hold its single share of Minera Marañón in
trust for our sole benefit and shall hold the share strictly in accordance with
our instructions.
  Upon our acquisition of a one hundred
percent interest in the Mineral Rights, Temasek is entitled to an annual 2.5%
net returns royalty related to the Mineral Rights.  However, if we pay
Temasek $2,000,000 within ninety days of our acquisition of a one hundred
percent interest in the Mineral Rights, Temasek will only be entitled to an
annual 1.0% net returns royalty related to the Mineral Rights.
  If we exercise the second twenty-five
percent option, resulting in our acquisition of a fifty percent interest in the
Mineral Rights, and we fail to acquire a one hundred percent interest in the
Mineral Rights, we and Temasek will form a joint venture in which we will be
wholly responsible for developing a feasible mining project and all necessary
facilities and Temasek shall retain a carried free interest in the mining
rights.  If we do not develop a feasible mining project within three
years of the Effective Date, we will be responsible pay Temasek an advance
minimum mining royalty of $500,000 per year, which will be deducted from
Temasek’s net return royalty on the Mineral Rights.
  Location
and Access
 
 The Gold
Sands Project in Peru is our principal project. It comprises an area of 38200 ha
(382 kilometer) along the interface of the Andean chain and the Amazon foreland
basin in Northeastern Peru.  We have established land positions in two
out of the three alluvial camps that exist in this area (the Alegría,
Condorcanqui, and Manseriche Alluvial Camps).  Of these, the
Manseriche Camp is the largest.  These camps straddle the boundary of
the Loreto (eastern) and Amazonas (western) departments of Northeastern Peru
approximately 350 kilometers from the regional center of Iquitos (population
400,000) which lies on the Amazon River.  Both Iquitos to the east, as
well as Tarapoto to the south are served with daily flights from
Lima.  The project area can be reached from either of these towns by
charter flights while supplies and heavy equipment can be barged in from either
Yurimaguas (on the Rio Huallaga) or Iquitos, or trucked in from Bagua on a fair
weather road to the village of Saramiriza located in the center of the
Manseriche Alluvial Camp along the southwestern bank of the Rio Marañón, roughly
in the center of the project area.  We are establishing a logistics
and administration base in the village of Saramiriza located in the center of
the Manseriche field on the southeastern bank of the Rio
Marañón.
  - 36
-
 Table of Contents
  The
following map shows the general location of the Mineral Rights:
  
   - 37
-
 Table of Contents
  Previous
Exploration History
 
 A
description of the work carried out on the property which comprises the Mineral
Rights since its discovery is as follows:
  ·
              1940s
      - A German company operated a 10 meter dragline some 10 kilometers
      downstream from Saramiriza at Puerto Elisa. This company left as a
      consequence of World War II.
  ·
              1979-80
      - Cia Panasa exploited the El Banco Island, 14 kilometers northwest from
      Saramiriza. Heavy earth moving equipment was used with positive
      results.
  ·
              1983
      - A group of Canadians operated a small suction dredge south of Saramiriza
      near the oil pipeline. They retired for technical and judicial reasons
      resulting from their proximity to the
pipeline.
  ·
              1989
      - Mutiferros SA, a Brazilian company, introduced four suction dredges, but
      discovered that suction dredges were
  inappropriate.
  ·
              1990-92
      - Cia Monica de Iquitos drilled off a 1000 ha lease and proved-up grades
      of some 300mg/m3 to a depth of 32 meters. They were unable to finance the
      project, and the lease was abandoned. This lease was subsequently
      picked-up by Lomas del Marañón SA in
1995.
  ·
              1994
      - Matsag Minerals, a company controlled by Glencor of Switzerland,
      acquired a number of leases near Puerto Elisa covering a large abandoned
      meander where the river had straightened its course subsequent to 1954.
      They installed a three foot bucket line dredge which was intended as a
      bulk sampling tool, although no drilling was done. These leases were
      subsequently acquired by Lomas del
Marañón.
  ·
              1995-97
      - Lomas del Marañón installed a good camp and operated a floating backhoe/
      washing plant which was operated despite a poorly designed treatment plant
      of sluices which gave low
recoveries.
  ·
              1998
      - IHC Meerwede of Holland undertakes preliminary metallurgical test work
      and engineering studies.
  ·
              1999-2000
      - Brazilian private interests, under the technical direction of an
      experienced and well regarded alluvial engineer Peter Rich, established
      viability and attempted to get the project financed in Canada. Due to the
      low gold price at the time, as well as the conservative approach adopted
      by major mining companies, the project failed to get
    traction.
  ·
              2007-08
      - Temasek Investments Inc, reacting to recommendations originally made by
      Peter Rich, consolidated the project area by staking additional ground in
      the Alegria, Condorcanqui, and Manseriche Alluvial
  Camps.
  Geology
and Mineralization
  Peru annually produces some six million
ounces of gold. Of this, nearly fifty percent  is derived from Peru's
largest gold mine, Yanacocha (Newmont), and close to ten percent comes from the
alluvial workings in the Madre de Dios river system. Alluvial production in Peru
has recently risen from about 200000 oz Au in 1991 to over 500000 oz Au in
2005.
  Although Peru has numerous small
alluvial gold occurrences, there are only four major alluvial gold fields:
Marañón-Santiago, Iquitos, Ucayali, and Madre de Dios. Large scale alluvial gold
deposits tend to form in environments associated with convergent plate
boundaries, particularly at the interface between fold belts and foreland
basins. In addition, a necessary requirement for the development of such gold
deposits is a metaliferous (gold-rich) hinterland and a river system that can
transfer gold from the zone of production in the upper reaches of
   - 38
-
 Table of Contents
   the
drainage basin, along the main trunk of the river system (zone of transfer) to
the zone of deposition, usually where the river profile flattens-out at the
limit between the highlands and alluvial plains.
  In the case of the Manseriche Alluvial
Camp, the Marañón and Santiago rivers rise from peak elevations of 2900 meters
and 3500 meters respectively, and travel a distance of some 900 kilometers
before converging at the Manseriche Gorge which lies at an elevation of 170 m
asl. From there, the Marañón (and later the Amazon) must travel another 4000
kilometers before reaching the Atlantic Ocean.  With respect to a
metalliferous hinterland, the Marañón-Santiago drainage basin is home to some of
the largest gold deposits and gold mining operations in the
world.  These include Newmont's Yanacocha (40 m oz Au), Goldfield's
Cerro Corona (which currently produce 350000 oz Au per annum), and Aurelian's
Fruta del Norte deposit (14 m oz Au).
  While the geology of the project area
has no effect on the gold mineralization other than the morphological control of
the Rio Marañón, it is the sequence of geological events which has importance in
the formation of the "gold sands" in the Manseriche Camp.
  The age of most of the gold
mineralization in the highlands of the Marañón-Santiago river system is
tertiary, and specifically Miocene. However, Eocene-aged tectonism resulted in
the formation of the eastern foothills of the Andes which effectively formed a
barrier directing all erosion from the hinterland towards a basin on the western
side of the Manseriche Gorge. Glacial erosion of the gold deposits in the
hinterland resulted in tills and moraines which were subsequently concentrated
in glacio-fluvial deposits by melting ice and intense rains in interglacial
periods of which a number have been identified in Peru. These sediments were
retained by the eastern fold belt of anticlines.
  What may have been a key event was the
Pajacuas thrust event during the Pliocene Era, which led to the breaching of the
closed basin and the subsequent formation of the Manseriche Gorge. This released
the gold-rich glacio-fluvial sediments to be reconcentrated and deposited in the
Rio Marañón flood plain east of the Gorge.
  The sequence of constant erosion,
glacio-fluvial concentration, fluvial transport, collection in an intermediate
(or series of intermediate) basin(s), and final alluvial concentration in the
Rio Marañón flood plain, provided the mixing and concentration which accounts
for the regular gold values in the sands and gravels as indicated by the Cia
Monica de Iquitos report.
  Monica
de Iquitos Report
  Between 1990 -1992, Cia Monica de
Iquitos undertook significant explorations efforts on their lease south of
Saramiriza, and on ground which now forms part of the Constitution Mining
controlled property.  Monica adopted a professional approach to the
exploration program and identified paleochannels from aerial photos and
satellite images.
  Subsequently, a 1000 ha area was drilled
by six inch Churn drills on 100 meter by 100 meter centers to a depth of 18
meters, where a fairly constant thin clay layer separating an upper sequence of
gravels form a lower sequence. Of the 500 holes drilled, five were drilled to 32
meters without reaching bedrock.
  This work was then checked by a Russian
government consulting company, Sojuzkarta, which used a ten inch rotary helicoid
drill to check holes down to 18 meters.  In addition, they took bulk
samples by backhoe.  Their drill results as well as those from the
collection of 85 m3 bulk samples were used to estimate a grade of 295 mg/m3
using a finess of 850 for correction to pure gold.  This number is
considered to be an underestimate as recovery was done utilizing 12 m X 0.7m
sluices with jute carpets which would not have been effective for the recovery
of fine gold.
  The study also indicated that grades
tended to increase with depth, particularly within the lower sequence of
gravels.  Furthermore, the drill logs suggested that gold grades are
constant laterally, with vertical variation being related to high or low energy
gravels and sands, as well as the age of the sequences (upper versus
lower).
  Additional studies have shown that much
of the gold tends to be considerably fine in size, indicating the possibility of
increased recovery (and therefore grade) with appropriate recovery techniques
(i.e., jigs and bowl concentrators).
   - 39
-
 Table of Contents
  Proposed
Exploration Program
 
 An exploration base camp is being set
up in the town of Saramiriza, which is located in the center of the Manseriche
alluvial camp on the western bank of the Marañón.
 
 A seismic survey will be conducted
along selected lines across the Marañón gravels in order to define the
gravel-bedrock contact.  This information is needed to plan a drilling
program and to assist with locating drill collar positions.  The selection
of seismic lines will made on the basis of interpretation of aerial photos and
satellite images, as well as from reconnaissance-scale mapping of sedimentary
features.  Scout drilling utilizing churn drills will be undertaken on
favorable areas, and anomalous zones will be followed up with reverse
circulation drilling in order to fully develop resources and
reserves.  These activities are
expected to be carried out over the next twelve
months.
 
 Bulk samples collected by backhoe
and/or excavator will be required for metallurgical testing as well as to
confirm drill results.  At the same time, mine development planning,
process design, and other engineering studies will be conducted with a view to
completing a feasibility study within an 18 month period.  Permitting work
will be initiated as early in the exploration and development cycle as possible,
so that trial or pilot dredging can be started as soon as feasibility has been
established.
 
 Anticipated costs for the next twelve
months are as follows:
 
 Activity
                                        USD
  000sMINERAL
      PROPERTY COSTS:Annual
      Fee
                                        200Surface
      Rights Access
                                        150EXPLORATIONMapping
                                        230Geophysics
      - Seismic
                                        400DRILLINGReconnaissance
                                        1,500Resource
      Definition
                                        2,000TECHNICAL
      SERVICESConsultants
                                        580Personnel
                                        430CAMP
      AND FIELD EXPENSESCamp
                                        630Field
                                        250TRANSPORT
      AND LOGISTICSAir
      Transport
                                        480Water
      Transport
                                        120Ground
      Transport
                                        150EQUIPMENT
      & PERMITTING
                                        210COMMUNITY
      OUTREACH
                                        300ADMINISTRATION
                                        150TOTAL
                                        7,780
   - 40
-
 Table of Contents
  ITEM 3. Legal
Proceedings.
  In January 2008, a contractor was
critically injured in an automobile accident while working for us in the area
referred to as the Atena Project located in northwestern
Argentina.  The contractor’s family has filed a claim in the Argentina
court system seeking monetary damages in the amount of $300,000 from the driver
of the automobile, who is considered an employee under Argentinean labor
law.  Although we have not been named as a party in this action, we
anticipate that we may be named as a defendant in this action.  During
the year ended December 31, 2008, we recorded a provisions for potential legal
claims relating to this incident in the amount of $200,000.
 
 ITEM 4. Submission
of Matters to a Vote of Security Holders.
  No
matters were submitted to a vote of our shareholders during the fourth quarter
of the fiscal year ended December 31, 2008.
  Executive
Officers of the Registrant
  Name
                Age
                OfficersWillem
      Fuchter
                56
                Mr.
      Fuchter, Ph.D., P. Geo., has served as our President, Chief Executive
      Officer, Principal Executive Officer and a Director since January 10,
      2008.  Dr. Fuchter has over twenty years of experience in the
      exploration and mining industry.  From 2004 to present, Dr.
      Fuchter has served as an independent consultant to various mining
      companies in Argentina, Brazil, Chile, Ecuador, Peru and
      Venezuela.  From 2002 to 2004, Dr. Fuchter served as a project
      manager and coordinator of a gold generative program for the Ivanhoe Group
      of Companies in China.  Dr. Fuchter was the co-founder and
      director of OreGalore Inc., where he worked from 2000 to
      2002.  Previously, Dr. Fuchter served in executive and
      managerial positions at a number of mining companies with operations in
      South America, Africa and Canada.  Dr. Fuchter earned a Ph.D.
      from Queen’s University, Kingston, Canada, and is a member of the
      Association of Professional Geoscientists of Ontario. Dr. Fuchter has
      served on the Board of Directors of a number of non-reporting companies in
      the exploration and mining industry.Peter
      Wiget
                44
                On
      August 20, 2008, the Board of Directors appointed Peter Wiget to act as
      Chief Financial Officer and hold this position until removed by the Board
      of Directors.  Mr. Wiget serves as an Account Manager for WITRAG
      Management Consultants AG, a position he has held since 1989. Mr. Wiget
      also serves as a Director, Chief Financial Officer, and/or Chief Executive
      Officer of several private companies in
  Switzerland.
 
   - 41
-
 Table of Contents
  PART
II
  ITEM 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
  Market
Prices
  Our common stock is currently quoted on
the OTCBB under the symbol “CMIN.”
 
 The following table sets forth the
range of high and low bid quotations for our common stock for each of the
periods indicated as reported by the OTCBB.  These quotations below
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.
  Fiscal Year Ended December 31,
      2008High Bid
                                  Low BidFiscal Quarter Ended:March
      31, 2008
                                  $1.33
                                  $0.71June
      30, 2008
                                  $1.3499
                                  $0.91September
      30, 2008
                                  $1.64
                                  $0.96December
      31, 2008
                                  $1.25
                                  $0.67Fiscal Year Ended December 31,
      2007High Bid
                                  Low BidFiscal Quarter Ended:March
      31, 2007
                                  $0.59
                                  $0.35June
      30, 2007
                                  $0.57
                                  $0.25September
      30, 2007
                                  $0.47
                                  $0.19December
      31, 2007
                                  $1.04
                                  $0.46
  Holders
of Common Stock
  As of December 31, 2008, we had
approximately one hundred thirty (130) holders of record of our common stock and
several other stockholders hold shares in street name.
 
 Dividend
Policy
  To date,
we have not declared or paid cash dividends on our shares of common
stock.  The holders of our common stock will be entitled to
non-cumulative dividends on the shares of common stock, when and as declared by
our board of directors, in its discretion.  We intend to retain all
future earnings, if any, for our business and do not anticipate paying cash
dividends in the foreseeable future.
  Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business conditions and such other
factors as our board of directors may deem relevant.
  Securities
Authorized for Issuance under Equity Compensation Plans
 
 Our board
of directors adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”)
on August 3, 2007.  The Board recently approved an amendment of the
Stock Incentive Plan, subject to shareholder approval at the 2009 annual meeting
of the shareholders, to increase the number of shares of common stock issuable
under the Stock Incentive Plan from 10,000,000 to 20,000,000.  Grants
of 4,835,000 options have been made under the Stock Incentive Plan and remain
outstanding as of December 31, 2008.  As of December 31, 2008,
5,165,000 shares remain available under the Stock Incentive Plan for future
equity grants.
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-
 Table of Contents
  
 The Stock
Incentive Plan authorizes us to grant awards in the form of shares of common
stock, including unrestricted shares of common stock; options to purchase shares
of common stock; stock appreciation rights or similar rights with a fixed or
variable price related to the fair market value of the shares of common stock
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions; any other security with the value derived from the value of
the shares of common stock, such as restricted stock and restricted stock units;
deferred stock units; dividend equivalent rights; or any combination of the
foregoing.  Our Compensation Committee administers the Plan by making
recommendations to the board or determinations regarding the persons to whom
awards should be granted and the amount, terms, conditions and restrictions of
the awards.
  The Plan
allows for the grant of incentive stock options, non-qualified stock options and
restricted stock awards.  The exercise price of any option shall be
determined at the time the option is granted by the Compensation Committee.
However, the exercise price may generally not be less than 100 percent of the
fair market value of the shares of common stock on the date of the grant. Each
option expires on the date determined by the Compensation Committee, but not
later than ten years after the grant date. The Compensation Committee may
determine in its discretion whether any option shall be subject to vesting and
the terms and conditions of any such vesting.  The Stock Incentive
Plan also provides for the immediate vesting of options, as well as authorizes
the Compensation Committee to cancel outstanding options or to make adjustments
to the transfer restrictions on those options in the event of certain changes in
corporate control of the company.  Awards, including options, made
under the Stock Incentive Plan are not assignable and also subject to any
restrictions and conditions imposed by the Compensation Committee.
  The
following table sets forth certain information regarding the Stock Incentive
Plan as of December 31, 2008:
  Plan
      category
                            
                            Number of securities to
      be
                              issued
      upon exercise of
                              outstanding
      options,
                              warrants
      and rights
                              (a)
                            
                            Weighted-average
      exercise
                              price
      of outstanding options,
                              warrants
      and rights
                              (b)
                            
                            Number
      of securities
                              remaining available
      for
                              future
      issuance under
                              equity
      compensation plans
                              (excluding
      securities
                              reflected
      in column (a))
                              (c)Equity
      compensation
                              plans approved by
                              stockholders
                            
                            -
                            
                            
                            -
                            
                            -Equity
      compensation
                              plans not approved by
                              stockholders 1
                            
                            4,835,000
                            
                            
                            $1.02
                            
                            5,165,000Total
                            
                            4,835,000
                            
                            
                            $1.02
                            
                            5,165,000
 
 1
              The Stock Incentive
      Planwas approved by our board of directors on August 3, 2007 and
      authorizes us to grant up to 10,000,000 shares under its terms and
      conditions.
  Recent
Issuances of Unregistered Securities
  There were no issuances of securities
without registration under the Securities Act of 1933 during the reporting
period which were not previously included in a Quarterly Report on Form 10-Q or
Current Report on Form 8-K.
 
 ITEM 6.   Selected Financial
Data.
  Not
applicable.
   - 43
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 Table of Contents
 
 ITEM 7.   Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
  This
Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,”
“intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,”
“continue,” and other expressions that are predictions of or indicate future
events and trends and that do not relate to historical matters identify
forward-looking statements.  These forward-looking statements are
based largely on our expectations or forecasts of future events, can be affected
by inaccurate assumptions, and are subject to various business risks and known
and unknown uncertainties, a number of which are beyond our
control.  Therefore, actual results could differ materially from the
forward-looking statements contained in this document, and readers are cautioned
not to place undue reliance on such forward-looking statements.  We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.  A wide variety of factors could cause or contribute to
such differences and could adversely impact revenues, profitability, cash flows
and capital needs.  There can be no assurance that the forward-looking
statements contained in this document will, in fact, transpire or prove to be
accurate.
  Factors
that could cause or contribute to our actual results differing materially from
those discussed herein or for our stock price to be adversely affected include,
but are not limited to:  (i) our short operating history; (ii)
our ability to manage business expansion; (iii) risks and uncertainties relating
to the interpretation of drill results, the geology, grade and continuity of
mineral deposits; (iv) results of initial feasibility, pre-feasibility and
feasibility studies, and the possibility that future exploration, development or
mining results will not be consistent with our expectations; (v) mining and
development risks, including risks related to accidents, equipment breakdowns,
labor disputes or other unanticipated difficulties with or interruptions in
production; (vi) the potential for delays in exploration or development
activities or the completion of feasibility studies; (vii) risks related to the
inherent uncertainty of production and cost estimates and the potential for
unexpected costs and expenses; (viii) risks related to commodity price
fluctuations; (ix) the uncertainty of profitability based upon our history of
losses; (x) risks related to failure to obtain adequate financing on a timely
basis and on acceptable terms for our planned exploration and development
projects; (xi) risks related to environmental regulation and liability; (xii)
risks that the amounts reserved or allocated for environmental compliance,
reclamation, post-closure control measures, monitoring and on-going maintenance
may not be sufficient to cover such costs; (xiii) risks related to tax
assessments; (xiv) political and regulatory risks associated with mining
development and exploration; (xv) other risks and uncertainties related to our
prospects, properties and business strategy; (xvi) potential that stockholders
may lose all or part of their investment if we are unable to compete in our
industry; (xvii)  our dependence on key personnel; (xvii) sale of
substantial amounts of our common stock that may have a depressive effect on the
market price of the outstanding shares of our common stock;
(xviii) possible issuance of common stock subject to options and warrants
that may dilute the interest of stockholders; (xix) our ability to comply
with Sarbanes-Oxley Act of 2002 Section 404; (xx) our nonpayment of
dividends and lack of plans to pay dividends in the future; (xxi) future
sale of a substantial number of shares of our common stock that could depress
the trading price of our common stock, lower our value and make it more
difficult for us to raise capital; (xxii) our additional securities
available for issuance, which, if issued, could adversely affect the rights of
the holders of our common stock; (xxiii) our stock price which is likely to
be highly volatile because of several factors, including a
relatively  limited public float; and (xxiv) indemnification of
our officers and directors.
  Recent Developments for the
Company
 
 Overview
  We were incorporated in the state of
Nevada under the name Crafty Admiral Enterprises, Ltd. on March 6,
2000.  Our original business plan was to sell classic auto parts to
classic auto owners all over the world through an Internet site/online store;
however, we were unsuccessful in implementing the online store and were unable
to afford the cost of purchasing, warehousing and shipping the initial inventory
required to get the business started.  As a result, we ceased
operations in approximately July 2002.
  - 44
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 Table of Contents
  During our fiscal year ended December
31, 2006, we reorganized our operations to pursue the exploration, development,
acquisition and operation of oil and gas properties.  On June 27,
2006, we acquired a leasehold interest in a mineral, oil and gas property
located in St. Francis County, Arkansas for a cash payment of $642,006, pursuant
to an oil and gas agreement we entered into on April 29, 2006 (the “Tombaugh
Lease”).  Shortly after acquiring the Tombaugh Lease, we suspended our
exploration efforts on the property covered by the Tombaugh Lease in order to
pursue business opportunities developing nickel deposits in Finland, Norway and
Western Russia.  On January 18, 2008, we assigned all of our right,
title and interest in and to the Tombaugh Lease to Fayetteville Oil and Gas,
Inc., which agreed to assume all of our outstanding payment obligations on the
Tombaugh Lease as consideration for the assignment.  On March 9, 2007,
we changed our name to better reflect our business to “Nordic Nickel Ltd.”
pursuant to a parent/subsidiary merger with our wholly-owned non-operating
subsidiary, Nordic Nickel Ltd., which was established for the purpose of giving
effect to this name change.  We were not successful pursuing business
opportunities developing nickel deposits in Finland, Norway and Western Russia
and again sought to reorganize our operations in November 2007.
 
 In
November 2007, we reorganized our operations and changed our name to
“Constitution Mining Corp.” to better reflect our current focus which is the
acquisition, exploration, and potential development of mining
properties.  Since November 2007, we have entered into agreements to
secure options to acquire the mineral and mining rights underlying properties
located in the Salta and Mendoza provinces of Argentina and in
Peru.  We are an exploration stage company and there is no assurance
that commercially exploitable reserves of gold or other minerals exist on any of
our property interests.  In the event that commercially exploitable
reserves of gold or other minerals exist on any of our property interests, we
cannot guarantee that we will make a profit.  If we cannot acquire or
locate mineral deposits, or if it is not economical to recover the mineral
deposits, our business and operations will be materially and adversely
affected.
 
 For the Years Ended December
31, 2008 and 2007
  Revenues
 
 We have not generated any revenues from
operations since our inception.
 
 Operating
Expenses
 
 We incurred operating expenses in the
amount of $5,479,705 for the year ended December 31, 2008, as compared to
operating expenses of $1,222,101 for the year ended December 31,
2007.  The substantial increase in our operating expenses for the year
ended December 31, 2008, as compared to the year ended December 31, 2007,
relates to the reorganization of our operations in November 2007 to focus on the
acquisition, exploration, and potential development of mining
properties.  Since November 2007, we entered into agreements to secure
options to acquire the mineral and mining rights underlying properties located
in the Salta and Mendoza provinces of Argentina and in Northeastern
Peru.  We have incurred significant expenditures during the year ended
December 31, 2008 in connection with the exploration and associated
administrative costs required to support our operations.
 
 We incurred exploration costs of
$924,961 for the year ended December 31, 2008 and did not incur any exploration
costs during the year ended December 31, 2007.  Exploration costs
incurred during the year ended December 31, 2008 related to the initial phases
of our exploration programs on the Atena Project and Cerro Amarillo
Property.  We incurred professional fees of $909,483 for the year
ended December 31, 2008, compared to professional fees of $182,793 for the year
ended December 31, 2007.  Professional fees, which primarily include
legal and accounting expenses, increased because our legal and accounting needs
increased as a result of changing the focus of our operations in November 2007.
We reported  stock-based compensation of $2,033,607 for the year ended
December 31, 2008, compared to $625,035 for the year ended December 31,
2007.  We reported management fees of $346,583 for the year ended
December 31, 2008, compared to $132,500 for the year ended December 31,
2007.  The increase in management fee and stock-based compensation is
attributable us retaining and compensating personnel and board members during
2008 to build the infrastructure necessary for our current and planned
operations during 2009 and beyond.  We incurred investor relations
expenses of $668,992 for the year ended December 31, 2008, compared to $99,726
for the year ended December 31, 2007.  The increase in investor
relations costs during the year ended December 31, 2008, as compared to the
prior year, is attributable to expenditures associated with increasing awareness
of our current and future operations.
  - 45
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 Table of Contents
  Other
Items
 
 We received other income of $174,872
during the year ended December 31, 2008, as compared to other income of $3,380
for the year ended December 31, 2007.  The substantial increase in
other income is attributable to our assignment of all of our right, title and
interest in and to a leasehold interest in an oil and gas property located in
St. Francis County, Arkansas to an assignee who agreed to assume all of our
outstanding payment obligations as consideration for the
assignment.  In connection with this assignment, we reported other
income of $307,115.
 
 During
the year ended December 31, 2008, we included on our financial statements a
provision for potential legal claims of $200,000 which relates to the legal
proceeding disclosed in Item 3 of this Form 10-K.
 
 Net
Loss
 
 As a
result of the above, for the year ended December 31, 2008 we reported a net loss
of $5,304,833, as compared to a net loss of $1,218,721 for the year ended
December 31, 2007.  The increasein our net loss was
primarily attributable to increased operating expenses incurred in connection
with the acquisition of our mineral property rights, related exploration
expenditures incurred during the reporting period, and the associated
administrative costs required to support our operations.
 
 Basic
and Diluted Loss per Share
 
 As a
result of the above, the basic and diluted loss per common share was $0.10 and
$0.025 for the years ended December 31, 2008 and 2007,
respectively.
 
 Liquidity
and Capital Resources
 
 At
December 31, 2008, we had cash and cash equivalents of $66,580 (December 31,
2007 - $54,642) and working capital deficit of $162,440 (December 31, 2007 -
$754,444).
 
 During
the twelve month period following the date of this report,  we
anticipate that we will not generate any revenue.  Our proposed plan
of exploration anticipates that we will incur exploration related expenditures
of $8,675,000 over the next twelve months.   We anticipate
spending approximately $100,000 in ongoing general and administrative expenses
per month for the next twelve months, for a total anticipated expenditure of
$1,200,000 over the next twelve months.  The general and
administrative expenses for the year will consist primarily of professional fees
for the audit and legal work relating to our regulatory filings throughout the
year, as well as transfer agent fees and general office expenses.  Our
current cash on hand is insufficient to be able to make our planned exploration
expenditures and to pay for our general administrative expenses over the next
twelve months.  Accordingly, we must obtain additional financing in
order to continue our plan of operations during and beyond the next twelve
months. We believe that debt financing will not be an alternative for funding
additional phases of exploration as we do not have limited tangible assets to
secure any debt financing. We anticipate that additional funding will be in the
form of equity financing from the sale of our common stock.  We are
currently seeking additional funding in the form of equity financing from the
sale of our common stock, but cannot provide investors with any assurance that
we will be able to raise sufficient funding from the sale of our common stock to
fund our complete exploration program. In the absence of such financing, we will
not be able to pursue our exploration program and maintain our mineral property
interests in good standing.  If we do not fulfill the terms of any of
these option agreements according to our business plan, then our ability to
commence or continue operations could be materially limited.  We also
may be forced to abandon our mineral property interests.   If we
are unable to raise additional capital in the near future, we will experience
liquidity problems and management expects that we will need to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other remedial measures.
  We may consider entering into a joint
venture arrangement to provide the required funding to explore the properties
underlying our mineral property interests. We have not undertaken any efforts to
locate a joint venture participant. Even if we determine to pursue a joint
venture participant, there is no assurance that any third party would enter into
a joint venture agreement with us in order to fund exploration of the properties
underlying our mineral property interests. If we enter into a joint venture
arrangement, we would likely have to assign a percentage of our interest in our
mineral property interests to the joint venture participant.
   - 46
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 Table of Contents
   Cash
Used in Operating Activities
  Operating
activities for the year ended December 31, 2008 and 2007 used cash of $3,279,958
and $475,780 respectively, which reflect our recurring operating
losses.  Our net loss of $5,304,833 for year ended December 31, 2008
was the primary reason for our negative operating cash flow.
  Cash
Used in Investing Activities
  For the
year ended December 31, 2008, we used $1,139,983 in investing activities, as
compared to $0 used in investing activities during the year ended December 31,
2007.  For the year ended December 31, 2008, we purchased $125,030 in
equipment, expended $64,693 for website development costs and expended $950,260
in connection with the acquisition of mineral property interests.
  Cash
from Financing Activities
  As we
have had no revenues since inception, we have financed our operations primarily
by using existing capital reserves and through private placements of our common
stock.  Net cash flows provided by financing activities for the year
ended December 31, 2008 was $4,431,879, as compared to $502,950 for the year
ended December 31, 2007. An increase in the cash flow provided by financing
activities was primarily due to $4,431,879 we received as net proceeds from the
issuance of common stock and warrants during the reporting period.
 
 Off
Balance Sheet Arrangements
  We do not
have any off-balance sheet debt nor did we have any transactions, arrangements,
obligations (including contingent obligations) or other relationships with any
unconsolidated entities or other persons that may have material current or
future effect on financial conditions, changes in the financial conditions,
results of operations, liquidity, capital expenditures, capital resources, or
significant components of revenue or expenses.
  Going
Concern
  We have
incurred net losses for the period from inception on March 6, 2000 to December
31, 2008 of $6,873,664 and have no source of revenue.  The continuity
of our future operations is dependent on our ability to obtain financing and
upon future acquisition, exploration and development of profitable operations
from our mineral properties.  These conditions raise substantial doubt
about our ability to continue as a going concern.
  Critical
Accounting Policies
  In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management Discussion and Analysis.  The
SEC indicated that a “critical accounting policy” is one which is both important
to the portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.  We believe the following critical accounting estimates
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements:
  Mineral
Property Costs
  Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased.  At the end of each fiscal quarter end, we assess the
carrying costs for impairment.  If proven and probable reserves are
established for a property and it has been determined that a mineral property
can be economically developed, costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve.
  Mineral
property exploration costs are expensed as incurred.
   - 47
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 Table of Contents
  Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis.  Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards.  Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.
  As of the
date of these financial statements, we have not established any proven or
probable reserves on our mineral properties and incurred only acquisition and
exploration costs.
  Although
we have taken steps to verify title to mineral properties in which it has an
interest, according to the usual industry standards for the stage of exploration
of such properties, these procedures do not guarantee our title.  Such
properties may be subject to prior agreements or transfers and title may be
affected by undetected defects.
  Stock-Based
Compensation
  Effective
January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment”, which
establishes accounting for equity instruments exchanged for employee services.
Under the provisions of SFAS No.123(R), stock-based compensation cost is
measured at the grant date, based on the calculated fair value of the award, and
is recognized as an expense over the employees’ requisite service period
(generally the vesting period of the equity grant).  Before January 1,
2006, we accounted for stock-based compensation to employees in accordance with
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” and complied with the disclosure requirements of SFAS No.
123, “Accounting for
Stock-Based Compensation”.  We adopted SFAS No. 23(R) using the
modified prospective method, which requires us to record compensation expense
over the vesting period for all awards granted after the date of adoption, and
for the unvested portion of previously granted awards that remain outstanding at
the date of adoption.  Accordingly, financial statements for the periods
prior to 1 January 2006 have not been restated to reflect the fair value method
of expensing share-based compensation.  Adoption of SFAS No. 123(R) does
not change the way we account for share-based payments to non-employees, with
guidance provided by SFAS No. 123 (as originally issued) and Emerging Issues
Task Force Issue No. 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.
  Foreign
Currency Translation
  Our
functional and reporting currency is U.S. dollars.  Our consolidated
financial statements are translated to U.S. dollars in accordance with SFAS No.
52, “Foreign Currency
Translation.”  Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date.  Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income.  We have not, to the date of these
consolidated financial statements, entered into derivative instruments to offset
the impact of foreign currency fluctuations.
 
 Recent
Accounting Pronouncements
 
 In May 2008, the FASB issued SFAS No.
163, “Accounting for Financial
Guarantee Insurance Contracts – an interpretation of FASB Statement No.
60”.  SFAS No. 163 provides enhanced guidance on the
recognition and measurement to be used to account for premium revenue and claim
liabilities and related disclosures and is limited to financial guarantee
insurance (and reinsurance) contracts, issued by enterprises included within the
scope of FASB Statement No. 60, Accounting and Reporting by Insurance
Enterprises.  SFAS No. 163 also requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation.  SFAS No. 163 is effective for financial statements issued
for fiscal years and interim periods beginning after 15 December 2008, with
early application not permitted.  We do not expect SFAS No. 163 to
have an impact on our consolidated financial statements.
 
 
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  In May 2008, the FASB issued SFAS No.
162, “The Hierarchy of
Generally Accepted Accounting Principles”. SFAS No. 162 is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. Generally Accepted Accounting
Principles (“GAAP”) for nongovernmental entities.  Prior to the
issuance of SFAS No. 162, GAAP hierarchy was defined in the American Institute
of Certified Public Accountants (“AICPA”) Statement on Auditing Standards No.
69, “The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting
Principles”.  SAS No. 69 has been criticized because it is
directed to the auditor rather than the entity.  SFAS No. 162
addresses these issues by establishing that the GAAP hierarchy should be
directed to entities because it is the entity, not its auditor, that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP.  SFAS No. 162 is effective 60
days following the SEC’s approval of the Public Company Accounting Oversight
Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles.  We do not
expect SFAS 162 to have a material effect on our consolidated financial
statements.
 
 In March 2008, the FASB issued SFAS No.
161, “Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
No. 133”.  SFAS No. 161 is intended to improve transparency in
financial reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows.  SFAS No. 161 applies
to all derivate instruments within the scope of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities”.  It also applies to
non-derivative hedging instruments and all hedged items designated and
qualifying as hedges under SFAS No. 133.  SFAS No. 161 is effective
prospectively for financial statements issued for fiscal years beginning after
15 November 2008, with early application encouraged.  The adoption of SFAS
No. 161 is not expected to have a material impact on our consolidated financial
statements.
  In December 2007, the FASB issued SFAS
No. 141 (revised 2007), “Business Combinations”. SFAS
No. 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the
acquiree  and the goodwill acquired. SFAS No. 141(R) also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS No. 141(R) is effective for fiscal
years beginning after 15 December 2008.  The adoption of SFAS
No. 141(R) is not expected to have a material impact on our
consolidated financial statements.
 In December 2007, the FASB issued SFAS
No. 160, “Noncontrolling
Interests in Consolidated Financial Statements – an amendment of Accounting
Research Bulletin No. 51”.  SFAS No. 160 establishes accounting
and reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable and to
the noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated.  SFAS No. 160 also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners.  SFAS No. 160 is effective
for fiscal years beginning after 15 December 2008.  The adoption of SFAS
No. 160 is not expected to have a material impact on our consolidated
financial statements.
  ITEM 7A.  Quantitative and Qualitative
Disclosures About Market Risk.
  Not
applicable
  ITEM 8. Financial
Statements and Supplementary Data.
  The
financial statements are listed in Part IV Item 15 of this Annual
Report on Form 10-K and are incorporated by reference in this
Item 8.
  ITEM 9. Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
  None.
   - 49
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 Table of Contents
  
  ITEM 9A.       Controls and
Procedures.
  Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures
  Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934.  Based on their evaluation as of
December 31, 2008, the end of the period covered by this Annual Report on
Form 10-K, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were
effective at a reasonable assurance level to ensure that the information
required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934, including this Annual Report, were recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and was accumulated and communicated to management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
  Management's
Report on Internal Control Over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting.  Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
  ·
              Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;
  ·
              Provide
      reasonable assurance that the transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally
      accepted accounting principles, and that receipts and expenditures of the
      Company are being made only in accordance with authorizations of
      management and directors of the Company;
and
  ·
              Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company's assets that
      could have a material effect on the financial
  statements.
  All
internal control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.
  In
connection with the filing of our Annual Report on Form 10-K, our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008.  In making this assessment,
our management used the criteria set forth by Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated
Framework.  Based on our assessment using those criteria,
management believes that, as of December 31, 2008, our internal control
over financial reporting is effective based on those criteria.
  This
annual report does not include an attestation report of our Company's registered
public accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.
  Changes
in Internal Control Over Financial Reporting
  There
have been no changes in our internal controls over financial reporting during
the quarter ended December 31, 2008, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
   - 50
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 Table of Contents
    ITEM 9B.   Other Information.
  None.
  PART
III
  ITEM 10. Directors,
Executive Officers and Corporate Governance.
  The
information concerning the identification and business experience of our
directors and identification of our audit committee financial expert is
incorporated herein by reference to the information set forth in our definitive
proxy statement for the 2009 Annual Meeting of Stockholders under the heading “
Election of Directors”, which proxy statement we expect to file with the
Securities and Exchange Commission within 120 days after the end of our fiscal
year ended December 31, 2008 (the “Proxy Statement”).
  The
information concerning the identification and business experience of our
executive officers is contained in the section entitled “Executive Officers of
the Registrant” in Part I of this Annual Report.
  The
information concerning compliance with Section 16(a) of the Exchange Act is
incorporated herein by reference to the information set forth in our Proxy
Statement under the heading “Section 16(a) Beneficial Ownership
Reporting.”
  The
information concerning significant employees and family relationships is
incorporated herein by reference to the information set forth in our Proxy
Statement under the heading “Family Relationships.”
  The
information concerning the our code of ethics is incorporated herein by
reference to the information set forth in our Proxy Statement under the heading
“Code of Ethics and Conduct.”
  ITEM 11.  Executive
Compensation.
  The
information concerning executive compensation is incorporated herein by
reference to the information set forth in our Proxy Statement under the heading
“ Executive Compensation.”
  The
information concerning compensation of directors is incorporated herein by
reference to the information set forth in our Proxy Statement under the heading
“ Compensation of Directors.”
  ITEM 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  The
information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference to the information set forth in
our Proxy Statement under the heading “Security Ownership of Certain Beneficial
Owners and Management and related Stockholder Matters.”
  ITEM 13. Certain
Relationships and Related Transactions, and Director
Independence.
  The
information concerning certain relationships and related party transactions and
director independence  is incorporated herein by reference to the
information set forth in our Proxy Statement under the headings “ Certain
Relationships and Related Person Transactions” and “Director
Independence.”
  ITEM 14. Principal
Accounting Fees and Services.
  The
information called for by Item 14 of Form 10-K is incorporated by
reference to the information in our Proxy Statement under the headings
“Ratification of Appointment of Independent Registered Public Accounting Firm”
and “Audit Committee.”
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 Table of Contents
  PART
IV
  ITEM 15. Exhibits,
Financial Statement Schedules.
  (a)(1)
 
 Index
      to Financial Statements
              
              Page (s)Report
      of Independent Registered Public Accounting Firm
              
              F-1Financial
      Statements:Consolidated
      Balance Sheets - December 31, 2008 and 2007
              
              F-2Consolidated
      Statements of Operations for the Years Ended December 31, 2008 and
      2007 and from Inception on March 6, 2000 to December 31,
    2008
              
              F-3Consolidated
      Statements of Changes in Stockholders’ Equity from Inception on March 6,
      2000 to December 31, 2008
              
              F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008 and
      2007 and from Inception on March 6, 2000 to December 31,
    2008
              
              F-5Notes
      to Consolidated Financial Statements
              
              F-6
 
 (a)(2)           Not
Applicable
 
 (a)(3)           Exhibits.
 
 See
(b) below
  (b)             
 Exhibits.
 
 See the
Exhibit Index following the signature page of this report, which is
incorporated herein by reference. Each management contract and compensatory plan
or arrangement required to be filed as an exhibit to this report is identified
in the Exhibit Index by an asterisk following its exhibit
number.
 
 (c)            
  Financial Statements Excluded From Annual Report to
Shareholders
 
 Not Applicable
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 Table of Contents
   
 Constitution
Mining Corp.
 (An
Exploration Stage Company)
 
 Consolidated
Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 
 Table of Contents
  JAMES STAFFORD
 
 James
Stafford Chartered
Accountants Suite 350
– 1111 Melville Street Vancouver,
British Columbia Canada
V6E 3V6
 Telephone
+1 604 669 0711 Facsimile
+1 604 669 0754 *
Incorporated professional, James Stafford, Inc.
 
 Report
of Independent Registered Public Accounting Firm
 
 
 To
the Board of Directors and Stockholders of
 Constitution
Mining Corp.
 (An
Exploration Stage Company)
 
 We have
audited the consolidated balance sheets of Constitution Mining Corp.(the
“Company”) as at 31 December 2008 and 2007, and the related consolidated
statements of loss and comprehensive loss, cash flows and changes in
stockholders’ equity for the years ended 31 December 2008, 2007 and
2006.  These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America).  Those
standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of 31
December 2008 and 2007 and the results of its operations, cash flows and changes
in stockholders’ equity for the years ended 31 December 2008, 2007 and 2006 in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, conditions exist which raise
substantial doubt about the Company’s ability to continue as a going concern
unless it is able to generate sufficient cash flows to meet its obligations and
sustain its operations.  Management’s plans in regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 
 /s/ James StaffordChartered
Accountants
 Vancouver,
Canada
 
 23
February 2009
  F -
1
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Consolidated
Balance Sheets
 (Expressed
in U.S. Dollars)
 As
at 31 December
 
 2008
                        
                        
                        2007$
                        
                        
                        
                        $AssetsCurrentCash
      and cash equivalents
                        
                        
                        66,580
                        
                        
                        
                        54,642Amounts
      receivable (Note 4)
                        
                        
                        60,000
                        
                        
                        
                        4,000Prepaid
      expense
                        
                        
                        271,250
                        
                        
                        
                        49,708397,830
                        
                        
                        
                        108,350Mineral property costs(Note 7)
                        
                        
                        5,120,260
                        
                        
                        
                        -Property and equipment(Note 5)
                        
                        
                        102,049
                        
                        
                        
                        -Unproven oil and gas
      exploration property(Note 3)
                        
                        
                        -
                        
                        
                        
                        481,504Website development cost(Note 6)
                        
                        
                        47,295
                        
                        
                        
                        -5,667,434
                        
                        
                        
                        589,854LiabilitiesCurrentAccounts
      payable and accrued liabilities (Note 8)
                        
                        
                        547,891
                        
                        
                        
                        62,787Convertible
      debentures (Note 9)
                        
                        
                        -
                        
                        
                        
                        788,619Due
      to related parties (Note 10)
                        
                        
                        12,379
                        
                        
                        
                        11,388560,270
                        
                        
                        
                        862,794Stockholders’
      equity (deficiency)Capital stock (Note
      12)Authorized300,000,000
      common shares, par value $0.001 and50,000,000
      preferred shares, par value $0.001Issued
      and outstanding31
      December 2008 – 58,469,456 common shares, par value $0.00131
      December 2007 – 48,582,300 common shares, par value $0.001
                        
                        
                        58,469
                        
                        
                        
                        48,582Additional
      paid in capital
                        
                        
                        7,945,496
                        
                        
                        
                        1,247,309Warrants(Note
      12)
                        
                        
                        3,976,863
                        
                        
                        
                        -Deficit,
      accumulated during the exploration stage
                        
                        
                        (6,873,664
                        )
                        
                        
                        (1,568,831
                        )5,107,164
                        
                        
                        
                        (272,940
                        )5,667,434
                        
                        
                        
                        589,854
 
 Nature, Basis of Presentation and
Continuance of Operations(Note 1), Commitments(Note 16), Subsequent Event (Note 17) and
Contingency(Note
18)
    F -
2
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Consolidated
Statements of Loss and Comprehensive Loss
 (Expressed
in U.S. Dollars)
 
 For
      the
                        period
      from
                        the
      date of
                        inception
      on
                        6
      March
                        2000
      to 31
                        December
                        2008
                        (Unaudited)
                        $
                      
                      
                      For
      the
                        year
      ended
                        31
                        December
                        2008
                        $
                      
                      
                      For
      the
                        year
      ended
                        31
                        December
                        2007
                        $
                      
                      
                      For
      the
                        year
      ended
                        31
                        December
                        2006
                        $ExpensesAmortization
      expense (Notes 5 and 6)
                      
                      
                      200,881
                      
                      
                      
                      40,379
                      
                      
                      
                      32,100
                      
                      
                      
                      128,402Default
      on oil and gas deposit
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Exploration
      costs
                      
                      
                      924,961
                      
                      
                      
                      924,961
                      
                      
                      
                      -
                      
                      
                      
                      -Interest
      on convertible debentures (Note 9)
                      
                      
                      126,525
                      
                      
                      
                      -
                      
                      
                      
                      74,770
                      
                      
                      
                      51,280Investor
      relations
                      
                      
                      768,718
                      
                      
                      
                      668,992
                      
                      
                      
                      99,726
                      
                      
                      
                      -Management
      fees (Note 11)
                      
                      
                      491,083
                      
                      
                      
                      346,583
                      
                      
                      
                      132,500
                      
                      
                      
                      12,000Office
      and miscellaneous
                      
                      
                      238,158
                      
                      
                      
                      212,290
                      
                      
                      
                      8,608
                      
                      
                      
                      2,236Professional
      fees
                      
                      
                      1,205,569
                      
                      
                      
                      909,483
                      
                      
                      
                      182,793
                      
                      
                      
                      68,025Rent
                      
                      
                      104,805
                      
                      
                      
                      89,722
                      
                      
                      
                      12,683
                      
                      
                      
                      2,400Stock-based
      compensation (Note 13)
                      
                      
                      2,658,642
                      
                      
                      
                      2,033,607
                      
                      
                      
                      625,035
                      
                      
                      
                      -Travel
                      
                      
                      307,574
                      
                      
                      
                      253,688
                      
                      
                      
                      53,886
                      
                      
                      
                      -Net
      operating loss before other items
                      
                      
                      (7,051,916
                      )
                      
                      
                      (5,479,705
                      )
                      
                      
                      (1,222,101
                      )
                      
                      
                      (289,343
                      )Other
      itemsForeign
      exchange income (loss)
                      
                      
                      (1,654
                      )
                      
                      
                      393
                      
                      
                      
                      (2,047
                      )
                      
                      
                      -Gain
      on sale of oil & gas property (Notes 3, 9 and 15)
                      
                      
                      307,115
                      
                      
                      
                      307,115
                      
                      
                      
                      -
                      
                      
                      
                      -Interest
      income
                      
                      
                      12,791
                      
                      
                      
                      7,364
                      
                      
                      
                      5,427
                      
                      
                      
                      -Provision
      for potential legal claims (Notes 8 and 18)
                      
                      
                      (200,000
                      )
                      
                      
                      (200,000
                      )
                      
                      
                      -
                      
                      
                      
                      -Project
      management fees
                      
                      
                      60,000
                      
                      
                      
                      60,000
                      
                      
                      
                      -
                      
                      
                      
                      -178,252
                      
                      
                      
                      174,872
                      
                      
                      
                      3,380
                      
                      
                      
                      -Net
      operating loss and comprehensive loss for the period
                      
                      
                      (6,873,664
                      )
                      
                      
                      (5,304,833
                      )
                      
                      
                      (1,218,721
                      )
                      
                      
                      (289,343
                      )Basic
      and diluted loss per common share
                      
                      
                      
                      
                      
                      
                      (0.100
                      )
                      
                      
                      (0.025
                      )
                      
                      
                      (0.006
                      )Weighted
      average number of common shares used in per share
    calculations
                      
                      
                      
                      
                      
                      
                      52,812,105
                      
                      
                      
                      47,875,502
                      
                      
                      
                      45,364,384
  
 F -
3
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Consolidated
Statements of Cash Flows
 (Expressed
in U.S. Dollars)
 
 For
      the period
                  from
      the date of
                  inception
      on 6
                  March
      2000 to 31
                  December
      2008
                  (Unaudited)
                  $
                
                
                For
      the
                  year
      ended
                  31
                  December
                  2008
                  $
                
                
                For
      the
                  year
      ended
                  31
                  December
                  2007
                  $
                
                
                For
      the
                  year
      ended
                  31
                  December
                  2006
                  $Cash
      flows used in operating activitiesNet
      loss for the period
                
                
                (6,873,664
                )
                
                
                (5,304,833
                )
                
                
                (1,218,721
                )
                
                
                (289,343
                )Adjustments
      to reconcile loss to net cash used by operating activitiesAccrued
      interest (Note 9)
                
                
                126,525
                
                
                
                -
                
                
                
                74,770
                
                
                
                51,280Amortization
      (Notes 5 and 6)
                
                
                200,881
                
                
                
                40,379
                
                
                
                32,100
                
                
                
                128,402Contributions
      to capital by related party – expenses
                
                
                15,000
                
                
                
                -
                
                
                
                600
                
                
                
                14,400Shares
      issued for services (Notes 12 and 15)
                
                
                24,199
                
                
                
                24,199
                
                
                
                -
                
                
                
                -Warrants
      issued for services (Notes 12 and 15)
                
                
                25,252
                
                
                
                25,252
                
                
                
                -
                
                
                
                -Gain
      on sale of oil & gas property (Notes 3, 9 and 15)
                
                
                (307,115
                )
                
                
                (307,115
                )
                
                
                -
                
                
                
                -Stock-based
      compensation (Note 13)
                
                
                2,658,642
                
                
                
                2,033,607
                
                
                
                625,035
                
                
                
                -Changes
      in operating assets and liabilities
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                -Increase
      in prepaid expenses
                
                
                (271,250
                )
                
                
                (221,542
                )
                
                
                (49,708
                )
                
                
                -Increase
      in amounts receivable
                
                
                (60,000
                )
                
                
                (56,000
                )
                
                
                (4,000
                )
                
                
                -Increase
      in accounts payable and accrued liabilities
                
                
                547,891
                
                
                
                485,104
                
                
                
                55,054
                
                
                
                2,208Increase
      (decrease) in due to related party
                
                
                12,379
                
                
                
                991
                
                
                
                9,090
                
                
                
                -(3,901,260
                )
                
                
                (3,279,958
                )
                
                
                (475,780
                )
                
                
                (93,053
                )Cash
      flows used in investing activitiesAcquisition
      of mineral property interest (Note 7)
                
                
                (950,260
                )
                
                
                (950,260
                )
                
                
                -
                
                
                
                -Purchase
      of equipment (Note 5)
                
                
                (125,030
                )
                
                
                (125,030
                )
                
                
                -
                
                
                
                -Website
      development costs (Note 6)
                
                
                (64,693
                )
                
                
                (64,693
                )
                
                
                -
                
                
                
                -Purchase
      of oil and gas property (Note 3)
                
                
                (642,006
                )
                
                
                -
                
                
                
                -
                
                
                
                (642,006
                )(1,781,989
                )
                
                
                (1,139,983
                )
                
                
                -
                
                
                
                (642,006
                )Cash
      flows from financing activitiesIssuance
      of common shares (Note 12)
                
                
                1,345,259
                
                
                
                692,309
                
                
                
                502,950
                
                
                
                80,000Issuance
      of warrants (Note 12)
                
                
                3,739,570
                
                
                
                3,739,570
                
                
                
                -
                
                
                
                -Convertible
      debentures (Note 9)
                
                
                665,000
                
                
                
                -
                
                
                
                -
                
                
                
                665,0005,749,829
                
                
                
                4,431,879
                
                
                
                502,950
                
                
                
                745,000Increase
      in cash and cash equivalents
                
                
                66,580
                
                
                
                11,938
                
                
                
                27,170
                
                
                
                9,941Cash
      and cash equivalents, beginning of period
                
                
                -
                
                
                
                54,642
                
                
                
                27,472
                
                
                
                17,531Cash
      and cash equivalents, end of period
                
                
                66,580
                
                
                
                66,580
                
                
                
                54,642
                
                
                
                27,472
 
 Supplemental Disclosures with Respect
of Cash Flows(Note 15)
 
 
  F -
4
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Consolidated
Statements of Changes in Stockholders’ Equity
 (Expressed
in U.S. Dollars)
 For
the years ended 31 December 2008 and 2007 (Audited), and
 For
the period from the date of inception on 6 March 2000 to 31 December 2008
(Unaudited)
 
 Number
      of
                                                shares
      issued
                                              
                                              
                                              Share
      capital
                                                $
                                              
                                              
                                              Additional
      paid-
                                                in
      capital
                                                $
                                              
                                              Warrants
                                                $
                                              
                                              Deficit,
                                                accumulated
                                                during
      the
                                                exploration
      stage
                                                $
                                              
                                              
                                              Total
      stockholders’
                                                equity
                                                $Balance
      at 6 March 2000 (inception)Common
      shares issued – cash
                                              
                                              
                                              2,000,000
                                              
                                              
                                              
                                              2,000
                                              
                                              
                                              
                                              1,000
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              3,000Net
      loss for the period
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (2,291
                                              )
                                              
                                              
                                              (2,291
                                              )Balance
      at 31 December 2000
                                              
                                              
                                              2,000,000
                                              
                                              
                                              
                                              2,000
                                              
                                              
                                              
                                              1,000
                                              
                                              
                                              -
                                              
                                              
                                              (2,291
                                              )
                                              
                                              
                                              709Common
      shares issued – cash
                                              
                                              
                                              5,000,000
                                              
                                              
                                              
                                              5,000
                                              
                                              
                                              
                                              42,000
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              47,000Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (10,571
                                              )
                                              
                                              
                                              (10,571
                                              )Balance
      at 31 December 2001
                                              
                                              
                                              7,000,000
                                              
                                              
                                              
                                              7,000
                                              
                                              
                                              
                                              43,000
                                              
                                              
                                              -
                                              
                                              
                                              (12,862
                                              )
                                              
                                              
                                              37,138Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (12,097
                                              )
                                              
                                              
                                              (12,097
                                              )Balance
      at 31 December 2002
                                              
                                              
                                              7,000,000
                                              
                                              
                                              
                                              7,000
                                              
                                              
                                              
                                              43,000
                                              
                                              
                                              -
                                              
                                              
                                              (24,959
                                              )
                                              
                                              
                                              25,041Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (11,019
                                              )
                                              
                                              
                                              (11,019
                                              )Balance
      at 31 December 2003
                                              
                                              
                                              7,000,000
                                              
                                              
                                              
                                              7,000
                                              
                                              
                                              
                                              43,000
                                              
                                              
                                              -
                                              
                                              
                                              (35,978
                                              )
                                              
                                              
                                              14,0223
      for 1 forward split
                                              
                                              
                                              14,000,000
                                              
                                              
                                              
                                              14,000
                                              
                                              
                                              
                                              (14,000
                                              )
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (6,451
                                              )
                                              
                                              
                                              (6,451
                                              )Balance
      at 31 December 2004
                                              
                                              
                                              21,000,000
                                              
                                              
                                              
                                              21,000
                                              
                                              
                                              
                                              29,000
                                              
                                              
                                              -
                                              
                                              
                                              (42,429
                                              )
                                              
                                              
                                              7,5712
      for 1 forward split
                                              
                                              
                                              21,000,000
                                              
                                              
                                              
                                              21,000
                                              
                                              
                                              
                                              (21,000
                                              )
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (18,338
                                              )
                                              
                                              
                                              (18,338
                                              )Balance
      at 31 December 2005
                                              
                                              
                                              42,000,000
                                              
                                              
                                              
                                              42,000
                                              
                                              
                                              
                                              8,000
                                              
                                              
                                              -
                                              
                                              
                                              (60,767
                                              )
                                              
                                              
                                              (10,767
                                              )Common
      shares issued –  cash
                                              
                                              
                                              4,000,000
                                              
                                              
                                              
                                              4,000
                                              
                                              
                                              
                                              76,000
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              80,000Contributions
      to capital by related party – expenses (Notes 11 and 15)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              14,400
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              14,400Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (289,343
                                              )
                                              
                                              
                                              (289,343
                                              )Balance
      at 31 December 2006
                                              
                                              
                                              46,000,000
                                              
                                              
                                              
                                              46,000
                                              
                                              
                                              
                                              98,400
                                              
                                              
                                              -
                                              
                                              
                                              (350,110
                                              )
                                              
                                              
                                              (205,710
                                              )Contributions
      to capital by related party – expenses (Notes 11 and 15)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              600
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              600Common
      shares issued –  debt (Note 15)
                                              
                                              
                                              1,145,300
                                              
                                              
                                              
                                              1,145
                                              
                                              
                                              
                                              21,761
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              22,906Common
      shares issued –  cash (Note 12)
                                              
                                              
                                              1,437,000
                                              
                                              
                                              
                                              1,437
                                              
                                              
                                              
                                              501,513
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              502,950Stock-based
      compensation
                                                (Note
      13)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              625,035
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              625,035Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (1,218,721
                                              )
                                              
                                              
                                              (1,218,721
                                              )Balance
      at 31 December 2007
                                              
                                              
                                              48,582,300
                                              
                                              
                                              
                                              48,582
                                              
                                              
                                              
                                              1,247,309
                                              
                                              
                                              -
                                              
                                              
                                              (1,568,831
                                              )
                                              
                                              
                                              (272,940
                                              )Common
      shares issued –  mineral properties (Notes 7, 12
                                                and
      15)
                                              
                                              
                                              3,800,000
                                              
                                              
                                              
                                              3,800
                                              
                                              
                                              
                                              4,166,200
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              4,170,000Common
      shares issued –  cash (Note 12)
                                              
                                              
                                              6,016,511
                                              
                                              
                                              
                                              6,016
                                              
                                              
                                              
                                              4,706,272
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              4,712,288Common
      shares issued –  services (Notes 12 and 15)
                                              
                                              
                                              70,645
                                              
                                              
                                              
                                              71
                                              
                                              
                                              
                                              49,380
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              49,451Value
      assigned to warrants (Note 12)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (3,739,570
                                              )
                                              
                                              3,739,570
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Share
      issuance costs
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (517,702
                                              )
                                              
                                              237,293
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (280,409
                                              )Stock-based
      compensation (Note 13)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,033,607
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,033,607Net
      loss for the year
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              -
                                              
                                              
                                              (5,304,833
                                              )
                                              
                                              
                                              (5,304,833
                                              )Balance
      at 31 December 2008
                                              
                                              
                                              58,469,456
                                              
                                              
                                              
                                              58,469
                                              
                                              
                                              
                                              7,945,496
                                              
                                              
                                              3,976,863
                                              
                                              
                                              (6,873,664
                                              )
                                              
                                              
                                              5,107,164
 
  F -
5
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 1.
              Nature, Basis of Presentation and Continuance of
      Operations
 
 Constitution
Mining Corp. (the “Company”) was incorporated in the State of Nevada under the
name “Crafty Admiral Enterprises, Ltd.” on 6 March 2000. On 9 March 2007 the
Company changed their name to “Nordic Nickel Ltd.”. The Company changed their
name pursuant to a parent/subsidiary merger between the Company (as Crafty
Admiral Enterprises, Ltd.) and its wholly-owned non-operating subsidiary, Nordic
Nickel Ltd., which was established for the purpose of giving effect to this name
change. On 15 November 2007 the Company changed their name to “Constitution
Mining Corp.”. The Company changed their name pursuant to a parent/subsidiary
merger between the Company (as Nordic Nickel Ltd.) and its wholly-owned
non-operating subsidiary, Constitution Mining Corp., which was established for
the purpose of giving effect to this name change. The Company is in the
exploration stage as its operations principally involve the examination and
investigation of land that may contain valuable minerals, for the purpose of
discovering the presence of ore, if any, and its extent.
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Constitution Mining Argentina SA, a
company incorporated under the laws of Argentina, since its date of
incorporation on 4 March 2008.
 
 The
Company is a development stage enterprise, as defined in Statements of Financial
Accounting Standards (“SFAS”) No. 7. The Company is devoting all of its present
efforts in securing and establishing a new business, and its planned principle
operations have not commenced, and, accordingly, no revenue has been derived
during the organization period.
 
 The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States of
America applicable to development stage enterprises, and are expressed in U.S.
dollars.  The Company’s fiscal year end is 31 December.
 
 The
Company’s consolidated financial statements as at 31 December 2008 and for the
year then ended have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities and commitments in
the normal course of business.  The Company had a loss of $5,304,833
for the year ended 31 December 2008 (31 December 2007 - $1,218,721) and has
working capital deficit of $162,440 at 31 December 2008 (31 December 2007 –
$754,444).
 
 Management
cannot provide assurance that the Company will ultimately achieve profitable
operations or become cash flow positive, or raise additional debt and/or equity
capital.  Management believes that the Company’s capital resources
should be adequate to continue operating and maintaining its business strategy
during the fiscal year ending 31 December 2009.  However, if the
Company is unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company will need to
curtail operations, liquidate assets, seek additional capital on less favorable
terms and/or pursue other remedial measures.  These consolidated
financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
 
  F -
6
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 On June
27, 2006, the Company acquired a 100% interest in an oil and gas property lease
located in St. Francis County, Arkansas (the “Tombaugh Lease”) for cash payment
of $642,006.   In 2007, the Company shifted its focus from oil and gas
sector to mineral exploration.
 
 Although
management is currently implementing its business plan, and seeking additional
sources of equity or debt financing and or a partner, there is no assurance
these activities will be successful.  This raises substantial doubt about
the ability of the Company to continue as a going concern.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 2.
              Significant
      Accounting Policies
 
 The
following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements.
 
 Principles
of consolidation
 
 All
inter-company balances and transactions have been eliminated in these
consolidated financial statements.
 
 Cash
and cash equivalents
 
 Cash and
cash equivalents include highly liquid investments with original maturities of
three months or less.
 
 Financial
instruments
 
 The
carrying value of cash and cash equivalents, amounts receivable, accounts
payable and accrued liabilities and amounts due to related parties approximates
their fair value because of the short maturity of these
instruments.  The Company’s operations are in Canada and virtually all
of its assets and liabilities are giving rise to significant exposure to market
risks from changes in foreign currency rates.  The Company’s financial
risk is the risk that arises from fluctuations in foreign exchange rates and the
degree of volatility of these rates.  Currently, the Company does not
use derivative instruments to reduce its exposure to foreign currency
risk.
 
 Derivative
financial instruments
 
 The
Company has not, to the date of these consolidated financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.
 
  F -
7
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 Income
taxes
 
 Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with SFAS No. 109, “Accounting for Income Taxes”,
which requires the use of the asset/liability method of accounting for income
taxes.  Deferred income taxes and tax benefits are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and for tax losses and credit
carry-forwards.  Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.  The Company provides for deferred taxes for the estimated
future tax effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
 
 Basic
and diluted net loss per share
 
 The
Company computes net income (loss) per share in accordance with SFAS No.128,
“Earnings per
Share”.  SFAS No. 128 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income
statement.  Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period.  Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method.  In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants.  Diluted EPS
excluded all dilutive potential shares if their effect is
anti-dilutive.
 
 Comprehensive
loss
 
 SFAS No.
130, “Reporting Comprehensive
Income”, establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements.  As
at 31 December 2008, the Company has no items that represent a comprehensive
loss and, therefore, has not included a schedule of comprehensive loss in the
consolidated financial statements.
 
 Mineral
property costs
 
 Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased in accordance with Emerging Issues Task Force (“EITF”) 04-2, “Whether Mineral Rights Are Tangible
or Intangible Assets”. At the end of each fiscal quarter end, the Company
assesses the carrying costs for impairment.  If proven and probable
reserves are established for a property and it has been determined that a
mineral property can be economically developed, costs will be amortized using
the units-of-production method over the estimated life of the probable
reserve.
 
 Mineral
property exploration costs are expensed as incurred.
 
 Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis.  Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards.  Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.
  F -
8
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 As of the
date of these consolidated financial statements, the Company has not established
any proven or probable reserves on its mineral properties and incurred only
acquisition and exploration costs.
 
 Although
the Company has taken steps to verify title to mineral properties in which it
has an interest, according to the usual industry standards for the stage of
exploration of such properties, these procedures do not guarantee the Company’s
title.  Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.
 
 Oil
and gas property
 
 The
Company accounts for its oil and gas exploration and development costs using the
successful efforts method.  Leasehold acquisition costs are
capitalized.  If proved reserves are found on an undeveloped property,
leasehold cost is transferred to proved properties.  Significant
undeveloped leases are reviewed periodically and a valuation allowance is
provided for any estimated decline in value.  Cost of other
undeveloped leases is expensed over the estimated average life of the
leases.  Cost of exploratory drilling is initially
capitalized.  In the absence of a determination that proved reserves
are found, the costs of drilling such exploratory wells are charged to
expense.  The Company makes this determination within one year
following the completion of drilling.  Other exploratory costs are
charged to expense as incurred.  Development costs, including
unsuccessful development wells, are capitalized.  Depletion,
depreciation and amortization of oil and gas producing properties are computed
on an aggregate basis using the units-of-production method.
 
 The
Financial Accounting Standards Board (the “FASB”) issued SFAS No.144 “Accounting for the Impairment or
Disposal of Long-Lived Assets” that requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  It
establishes guidelines for determining recoverability based on future net cash
flows from the use of the asset and for the measurement of the impairment
loss.  Impairment loss under SFAS No. 144 is calculated as the
difference between the carrying amount of the asset and its fair
value.  Any impairment loss is recorded in the current period in which
recognition criteria are first applied and met.  Under the successful
efforts method of accounting for oil and gas operations, the Company must
periodically assess it proved properties for impairments by comparing the
aggregate net book carrying amount of all proved properties with their aggregate
future net cash flows.  The statement requires that the impairment
review be performed on the lowest level of asset groupings for which there are
identifiable cash flows.
  Property,
plant and equipment
  Property,
plant and equipment are recorded at cost and depreciation is provided over their
estimated economic lives at 30%.
 
 Website development costs
 
 The costs
of computer software developed or obtained for internal use, during the
preliminary project phase, as defined under AICPA Statement of Position 98-1
“Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use”, will be
expensed as incurred.  The costs of website development during the
planning stage, as defined under EITF No. 00-2 “Accounting for Web Site Development
Costs”, will also be expensed as incurred.
  F -
9
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 Computer
software, website development incurred during the application and infrastructure
development stage, including external direct costs of materials and services
consumed in developing the software and creating graphics and website content,
will be capitalized and amortized over the estimated useful life, beginning when
the software is ready for use and after all substantial testing is completed and
the website is operational.
 
 Segments
of an enterprise and related information
 
 SFAS No.
131, “Disclosures about
Segments of an Enterprise and Related Information”, supersedes SFAS No. 14,
“Financial Reporting for
Segments of a Business Enterprise.”  SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public.  It also establishes standards for disclosures regarding
products and services, geographic areas and major customers.  SFAS No.
131 defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.  The Company has evaluated this SFAS and does not believe
it is applicable at this time.
 
 Start-up
expenses
 
 The
Company has adopted Statement of Position No. 98-5, “Reporting the Costs of Start-up
Activities”, which requires that costs associated with start-up
activities be expensed as incurred.  Accordingly, start-up costs associated
with the Company's formation have been included in the Company’s expenses for
the period from the date of inception on 6 March 2000 to 31 December
2008.
 
 Foreign
currency translation
 
 The
Company’s functional and reporting currency is U.S. dollars.  The
consolidated financial statements of the Company are translated to U.S. dollars
in accordance with SFAS No. 52, “Foreign Currency
Translation.”  Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date.  Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income.  The Company has not, to the date of
these consolidated financial statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.
 
 Use
of estimates
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenditures during the reporting period.  Actual results could
differ from these estimates.
 
 Comparative
figures
 
 Certain
comparative figures have been adjusted to conform to the current year’s
presentation.
  F -
10
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 Stock-Based
Compensation
 
 Effective
1 January 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment”, which
establishes accounting for equity instruments exchanged for employee services.
Under the provisions of SFAS No.123(R), stock-based compensation cost is
measured at the grant date, based on the calculated fair value of the award, and
is recognized as an expense over the employees’ requisite service period
(generally the vesting period of the equity grant). Before 1 January 2006, the
Company accounted for stock-based compensation to employees in accordance with
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” and complied with the disclosure requirements of SFAS No.
123, “Accounting for
Stock-Based Compensation”.  The Company adopted SFAS No. 123(R)
using the modified prospective method, which requires the Company to record
compensation expense over the vesting period for all awards granted after the
date of adoption, and for the unvested portion of previously granted awards that
remain outstanding at the date of adoption.  Accordingly, financial
statements for the periods prior to 1 January 2006 have not been restated to
reflect the fair value method of expensing share-based compensation.
 Adoption of SFAS No. 123(R) does not change the way the Company accounts
for share-based payments to non-employees, with guidance provided by SFAS No.
123 (as originally issued) and EITF No. 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.
 
 Recent
accounting pronouncements
 
 In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No.
60”.  SFAS No. 163 provides enhanced guidance on the
recognition and measurement to be used to account for premium revenue and claim
liabilities and related disclosures and is limited to financial guarantee
insurance (and reinsurance) contracts, issued by enterprises included within the
scope of FASB Statement No. 60, Accounting and Reporting by Insurance
Enterprises.  SFAS No. 163 also requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation.  SFAS No. 163 is effective for financial statements issued
for fiscal years and interim periods beginning after 15 December 2008, with
early application not permitted.  The Company does not expect SFAS No.
163 to have an impact on its consolidated financial statements.
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. Generally Accepted Accounting Principles
(“GAAP”) for nongovernmental entities.  Prior to the issuance of SFAS
No. 162, GAAP hierarchy was defined in the American Institute of Certified
Public Accountants (“AICPA”) Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles”.  SAS
No. 69 has been criticized because it is directed to the auditor rather than the
entity.  SFAS No. 162 addresses these issues by establishing that the
GAAP hierarchy should be directed to entities because it is the entity, not its
auditor, that is responsible for selecting accounting principles for financial
statements that are presented in conformity with GAAP.  SFAS No. 162
is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting
Principles.  The Company does not expect SFAS 162 to have a material
effect on its consolidated financial statements.
  F -
11
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No.
133”.  SFAS No. 161 is intended to improve transparency in
financial reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows.  SFAS No. 161 applies
to all derivate instruments within the scope of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities”.  It also applies to
non-derivative hedging instruments and all hedged items designated and
qualifying as hedges under SFAS No. 133.  SFAS No. 161 is effective
prospectively for financial statements issued for fiscal years beginning after
15 November 2008, with early application encouraged.  The adoption of
SFAS No. 161 is not expected to have a material impact on the Company’s
consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”. SFAS
No. 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the
acquiree  and the goodwill acquired. SFAS No. 141(R) also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS No. 141(R) is effective for fiscal
years beginning after 15 December 2008.  The adoption of SFAS No.
141(R) is not expected to have a material impact on the Company’s consolidated
financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No. 51”.  SFAS No. 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable and to the
noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated.  SFAS No. 160 also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners.  SFAS No. 160 is effective
for fiscal years beginning after 15 December 2008.  The adoption of
SFAS No. 160 is not expected to have a material impact on the Company’s
consolidated financial statements.
 
 International
Financial Reporting Standards
 
 In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.  Under the proposed
roadmap, the Company would be required to prepare financial statements in
accordance with IFRS in fiscal year 2014, including comparative information also
prepared under IFRS for fiscal 2013 and 2012.  The Company is
currently assessing the potential impact of IFRS on its financial statements and
will continue to follow the proposed roadmap for future
developments.
 
  F -
12
 Table of Contents
  Constitution Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 3.
              Unproven
      Oil and Gas Exploration Property
 
 Tombaugh
Farms Property – St. Francis County, Arkansas
 
 On 27
June 2006, the Company acquired a 100% interest in a mineral, oil and gas
property lease located in St. Francis County, Arkansas (the “Tombaugh Lease”)
for an up front cash payment of $642,006.  The lease is for a period
of five years and is subject to a 19% royalty on oil and other liquid
hydrocarbons produced, saved and sold, and can be extended at the option of the
Company for an additional five years on the same terms.  By agreements
effective 18 January 2008, the Company assigned all of its rights, title and
interest in the Tombaugh Lease with a book value of $481,504 to a purchaser in
consideration for the purchaser assuming the Company’s outstanding payment
obligations of $788,619 related to its convertible debentures. The Company
recorded a gain of $307,115 upon completion of this transaction (Notes 9 and
15).
 
 Balance
      at 31 December
                        2008
                        $
                      
                      
                      Balance
      at 31 December
                        2007
                        $Unproven
      oil and gas properties consist of the following:Undeveloped
      properties
                      
                      
                      -
                      
                      
                      
                      481,504-
                      
                      
                      
                      481,504
 
 The
following sets forth costs incurred for oil and gas property acquisition and
development activities, whether capitalized or expensed.
 
 During
      the year
                        ended
      31
                        December
                        2008
                        $
                      
                      
                      During
      the year
                        ended
      31
                        December
                        2007
                        $Acquisition
      – unproved
                      
                      
                      481,504
                      
                      
                      
                      513,604Disposal
      through assignment of rights
                      
                      
                      (481,504
                      )
                      
                      
                      -Amortization
                      
                      
                      -
                      
                      
                      
                      (32,100
                      )-
                      
                      
                      
                      481,504
 
 4.
              Amounts
Receivable
 
 Amounts
receivable are non-interest bearing, unsecured and have settlement dates within
one year.
 
  F -
13
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 5.
              Property
      and Equipment
 
 Cost
                    $
                  
                  
                  Accumulated
                    amortization
                    $
                  
                  
                  Net
      book
                    value
                    as
      at 31
                    December
                    2008
                    $Equipment
                  
                  
                  125,030
                  
                  
                  
                  22,981
                  
                  
                  
                  102,049125,030
                  
                  
                  
                  22,981
                  
                  
                  
                  102,049
 
 During
the year ended 31 December 2008, total additions to property and equipment were
$125,030 (31 December 2007 - $Nil).
 
 6.
              Website
      Development Cost
 
 Cost
                    $
                  
                  
                  Accumulated
                    amortization
                    $
                  
                  
                  Net
      book
                    value
                    as
      at 31
                    December
                    2008
                    $Website
      development
                  
                  
                  64,693
                  
                  
                  
                  17,398
                  
                  
                  
                  47,29564,693
                  
                  
                  
                  17,398
                  
                  
                  
                  47,295
 
 During
the year ended 31 December 2008, total additions to website development were
$64,693 (31 December 2007 - $Nil).
 
 7.
              Mineral
      Property Costs
 
 Atena
Gold Project
 
 On 12
December 2007, the Company entered into an assignment agreement to acquire the
right to explore and option to purchase the 3,676 hectare Atena Gold Project
located in the Salta Province of Argentina.   Pursuant to the
assignment agreement, the Company is required to issue 500,000 shares (issued
and valued at $0.70 per share) and pay $60,000 (paid). The Company will acquire
100% of the option if it incurs a minimum of $3,740,000 in work commitment
expenditures on the property and issue 7,000,000 shares according to the
following schedule (Notes 12, 15 and 16):
 
  F -
14
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 a. $240,000
in expenditures (incurred) plus a further issuance of 1,000,000 shares (issued
and valued at $1.59 per share) on or before
 15 March 2008;
 b. a further
$500,000 in expenditures plus a further issuance of 2,000,000 shares on or
before 15 March 2009;
 c. a further
$1,000,000 in expenditures plus a further issuance of 4,000,000 shares on or
before 15 March 2010; and
 d. a
further $2,000,000 in expenditures on or before 15 March 2011.
  The
option is subject to a 1% net smelter returns royalty.
 
 Expenditures
related to the Atena Gold Project for the year ended 31 December 2008 consist of
camp costs and field supplies of $48,211 (31 December 2007 - $Nil), geochemical
of $51,161 (31 December 2007 - $Nil), geology and engineering of $8,123 (31
December 2007 - $Nil), geophysics of $1,903 (31 December 2007 - $Nil), taxes and
permitting of $14,909 (31 December 2007 - $Nil), transportation and fuel of
$94,528 (31 December 2007 - $Nil), trenching of $12,725 (31 December 2007 -
$Nil), and wages, consulting and management fees of $114,609 (31 December 2007 -
$Nil).
 
 Cerro
Amarillo Property
 
 On 8
January 2008, the Company entered into an assignment agreement to explore and
option the 14,221 hectare Cerro Amarillo Property located in the Province of
Mendoza, Argentina with a company related to the Company by way of a director
and shareholder in common.  Pursuant to the terms of the assignment
agreement, the Company issued 300,000 shares (issued and valued at $0.70 per
share) and pay $10,000 (paid).  The Company is to acquire a 100% of
the option if it incurs a minimum of $450,000 in work commitment expenditures on
the property and issues 2,100,000 shares according to the following schedule
(Notes 12, 15 and 16):
 
 a. $200,000
in expenditures plus a further issuance of 300,000 shares on or before 8 January
2009;
 b. a further
$250,000 in expenditures plus a further issuance of 600,000 shares on or before
8 January 2010;
 c. a further
issuance of 600,000 shares on or before 8 January 2011; and
 d. a further
issuance of 600,000 shares on or before 8 January 2012.
 
 To
exercise the option the company is required to issue a further 3,000,000
shares.  The option is subject to a 1% net smelter returns
royalty.
 
 Expenditures
related to the Cerro Amarillo Property for the year ended 31 December 2008
consist of camp costs and field supplies of $7,589 (31 December 2007 - $Nil),
geochemical of $1,903 (31 December 2007 - $Nil), geology and engineering of $345
(31 December 2007 - $Nil), taxes and permitting of $12,973 (31 December 2007 -
$Nil), transportation and fuel of $35,544 (31 December 2007 - $Nil), and wages,
consulting and management fees of $66,576 (31 December 2007 -
$Nil).
 
  F -
15
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 Amira,
Amira Norte and Esparta II
 
 On 17
March 2008, the Company entered into an assignment agreement with Proyectos
Mineros S.A. (“PMSA”), a company related to the Company by way of a director and
shareholder in common. Under the assigned agreement, PMSA assigned to the
Company PMSA’s right to explore and option to purchase a 90% interest in three
mining properties referred to as “Amira”, “Amira Norte” and “Esparta II”
(collectively, the "Properties"), which are located in the Province of Salta,
Argentina. In order for the Company to keep its interest in good standing and to
exercise the option to acquire a 90% interest in the Properties, the Company
must make the following payments to the Titleholder, as set forth in the
underlying option agreement (Note 16):
  a.         US$75,000
by 19 January 2009; b.         a
further US$150,000 by 19 January 2010;
 c.         a
further US$200,000 by 19 January 2011; and
 d. a further
US$1,000,000 by 19 January 2012, by means of which final payment the Option to
acquire
 a 90% interest in the Properties will have been automatically
exercised.
 
 Expenditures
related to the Amira, Amira Norte and Esparta II Properties for the year ended
31 December 2008 consist of business development and project generation of
$18,125 (31 December 2007 - $Nil), camp costs and field supplies of $13,065 (31
December 2007 - $Nil), property assessment of $6,428 (31 December 2007 - $Nil),
transportation and fuel of $74,374 (31 December 2007 - $Nil), and wages,
consulting and management fees of $99,985 (31 December 2007 -
$Nil).
 
 Peruvian
Gold Sands
 
 On 29
September 2008, the Company entered into a Mineral Right Option Agreement with
Temasek Investments Inc. (Temasek) to acquire mining properties totalling 382
km2
in Northeastern Peru (the “Agreement”).  Pursuant to this Agreement,
the company acquired four separate options from Temasek, each providing for the
acquisition of a 25% interest in certain mining properties.
 
 The
Company may exercise the initial 25% option by fulfilling the following
conditions:
 
 a. Pay a
non-refundable $375,000 on the date the Agreement is executed
(paid);
 b. Issue
2,000,000 shares within 5 business days (issued and valued at $1.01) (Notes 12
and 15); and
 c. Pay an
additional $375,000 prior to 28 December 2008 (paid).
 
 The
Company may exercise the second 25% option by fulfilling the following
conditions by 29 March 2009:
 
 a. Exercise
and complete the initial 25% option; b. Pay an
additional $1,250,000; and
 c. Issue an
additional 2,000,000 shares.
 
  F -
16
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 The
Company may exercise the third 25% option by fulfilling the following conditions
by 29 September 2009:
 
 a. Exercise
and complete the initial and second 25% options; b. Pay an
additional $3,000,000; and
 c. Issue an
additional 2,000,000 shares.
 
 The
Company may exercise the final 25% option by fulfilling the following conditions
by 29 March 2010:
 
 a. Exercise
and complete the initial, second and third 25% options;
 b. Pay an
additional $5,000,000; and
 c. Issue an
additional 4,000,000 shares.
 
 The
property is subject to a 2.5% net returns royalty that the Company can reduce to
1.0% upon payment of a further $2,000,000 within 90 days of the exercise and
completion of the final 25% option (Note 16).
 
 Expenditures
related to the Peruvian Gold Sands for the year ended 31 December 2008 consist
of business development and project generation of $35 (31 December 2007 - $Nil),
camp costs and field supplies of $214 (31 December 2007 - $Nil), taxes and
permitting of $23,562 (31 December 2007 - $Nil), transportation and fuel of
$61,634 (31 December 2007 - $Nil), and wages, consulting and management fees of
$156,440 (31 December 2007 – $Nil).
 
 8.
              Accounts Payable and Accrued
      Liabilities
 
 Accounts
payable and accrued liabilities are non-interest bearing, unsecured and have
settlement dates within one year.
 
 Included
in accounts payable and accrued liabilities at 31 December 2008 is a provision
for $200,000 (31 December 2007 - $Nil) related to potential legal claims on
incidents arising from the mineral property interests (Note 18).
 
  F -
17
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 9.
              Convertible
      Debentures
 Balance
      at 31
                                                  December
      2008
                                                  $
                                                
                                                Balance
      at 31
                                                  December
      2007
                                                  $Issued
      in April 2006, the convertible debenture bears interest at a rate of 10%
      per annum on any unpaid principle balance, is secured by a general charge
      on the assets of the Company, and has no fixed terms of
      repayment.  The holder of the convertible debenture has the
      right to convert any portion of the unpaid principle and/or accrued
      interest at any time within thirty-six months for the issue date, on the
      basis of $1.00 per unit where a unit consists of one common share and one
      warrant to purchase one common share of the Company for $1.75 for a period
      of twenty-four months from the date of conversion.  On 21 August
      2006 the company repaid $250,000 of the balance owing. On 18 January 2008
      the payment obligations were assumed by the purchaser of the Tombaugh
      Lease (Note 3).  The balance of $306,378 outstanding at 31
      December 2007 consists of principle and unpaid accrued interest of
      $250,000 and $56,378 respectively (Note 15).
                                                Nil
                                                
                                                306,378Issued
      in June 2006, the convertible debenture bears interest at a rate of 10%
      per annum on any unpaid principle balance, is secured by a general charge
      on the assets of the Company, and has repayment terms wherein the
      principle and accrued interest shall be due the later of (i) sixty days
      after the date the convertible debenture was issued or (ii) upon the
      lenders written demand for repayment.  The holder of the
      convertible debenture has the right to convert any portion of the unpaid
      principle and/or accrued interest into common shares of the Company at any
      time and from time to time prior to the maturity date on the basis of
      $0.70 per share for each dollar of principle and interest due and payable.
      On 18 January 2008 the payment obligations were assumed by the purchaser
      of the Tombaugh Lease (Note 3).  The balance of $482,241
      outstanding at 31 December 2007 consists of principle and unpaid accrued
      interest of $415,000 and $67,241 respectively (Note 15).
                                                Nil
                                                
                                                482,241Nil
                                                
                                                788,619
 
 By
agreements effective 18 January 2008, the Company assigned all of its rights,
title and interest in the Tombaugh Lease with a book value of $481,504 to a
purchaser in consideration for the purchaser assuming the Company’s outstanding
payment obligations of $788,619 related to its convertible debentures. The
Company recorded a gain of $307,115 upon completion of the transaction (Notes 3
and 15).
 
 10.
              Due
      to Related Parties
 
 As at 31
December 2008, the amount due to related parties consists of $12,379 (31
December 2007 - $11,388) payable to the directors of the
Company.  This balance is non-interest bearing, unsecured, and has no
fixed terms of repayment.
  F -
18
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 11.
              Related
      Party Transactions
 
 During
the year ended 31 December 2008, the Company paid or accrued management and
consulting fees of $346,583 (31 December 2007 - $132,500) to directors and
officers of the Company or company’s controlled by directors and
officer.
 
 During
the year ended 31 December 2008, director and shareholder of the Company made
contributions to capital for management fees and rent of $Nil (31 December 2007
- $Nil, cumulative - $12,000) and $Nil (31 December 2007 - $600, cumulative -
$3,000) respectively.  This amount has been recorded as an increase in
expenditures and an increase in additional paid-in capital (Note
15).
 
 12.
              Capital
      Stock
 
 Authorized
 
 The total
authorized capital consists of:
 
 ·
              300,000,000
      of common shares with par value of
$0.001
 ·
              50,000,000
      of preferred shares with par value of
$0.001
 
 Issued
and outstanding
 
 As at 31
December 2008, the total issued and outstanding capital stock is 58,469,456
common shares with a par value of $0.001 per share.
 
 On 9
October 2008, the company issued 2,000,000 common shares valued at $1.01 per
share in pursuant to the Peruvian Gold Sands assignment agreement (Notes 7 and
15).
 
 On 19
August 2008, the Company issued 350,511 agent compensation warrants for services
rendered by a private placement agent.  Each share purchase warrant
entitles the holder to purchase one common share at a price of $1.40 up to 19
August 2009, commencing 19 February 2009 (Note 15).
 
 On 19
August 2008, the Company issued 5,007,300 Units at a price of $0.80 per Unit for
proceeds of $3,725,431, net of issue costs of $280,409.  Each unit
consists of one common share and one share purchase warrant.  Each
share purchase warrant entitles the holder to purchase an additional common
share at a price of $1.40 up to 19 August 2009, commencing 19 February
2009.
 
 On 6
August 2008, the Company issued 1,000,000 common shares valued at $1.59 per
share pursuant to the Atena Gold Project assignment agreement (Notes 7 and
15).
 
 On 11
April 2008, the Company issued an additional 70,645 Units at a price of $0.70
per Unit for services rendered by a private placement agent. Each Unit consists
of one common share and one share purchase warrant.  Each share
purchase warrant entitles the holder to purchase an additional common share at a
price of $1.40 up to 7 April 2009, commencing 7 October 2008 (Note
15).
  F -
19
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 On 9
April 2008, the Company issued 1,009,211 Units at a price of $0.70 per
Unit.  Each Unit consists of one common share and one share purchase
warrant.  Each share purchase warrant entitles the holder to purchase
an additional common share at a price of $1.40 up to 7 April 2009, commencing 7
October 2008.
 
 On 25
January 2008, the Company issued 300,000 common shares valued at $0.70 per share
pursuant to the Cerro Amarillo assignment agreement (Notes 7 and
15).
 
 On 25
January 2008, the Company issued 500,000 common shares valued at $0.70 per share
pursuant to the Atena Gold Project assignment agreement (Notes 7 and
15).
 
 During
the year ended 31 December 2007, the Company issued 1,145,300 common shares for
convertible debentures of $22,906 (Notes 9 and 15).
 
 During
the year ended 31 December 2007, the Company issued 1,437,000 common shares for
cash proceeds of $502,950.
 
 Share
Purchase Warrants
 
 The
following share purchase warrants were outstanding at 31 December
2008:
 
 Exercise
                        price
                        $
                      
                      
                      Number
                        of
      warrants
                        $
                      
                      
                      Remaining
                        contractual
      life (years)
                        $Warrants
                      
                      
                      1.40
                      
                      
                      
                      1,009,211
                      
                      
                      
                      0.27Warrants
                      
                      
                      1.40
                      
                      
                      
                      70,645
                      
                      
                      
                      0.27Warrants
                      
                      
                      1.40
                      
                      
                      
                      5,007,300
                      
                      
                      
                      0.63Agent
      compensation warrants
                      
                      
                      1.40
                      
                      
                      
                      350,511
                      
                      
                      
                      0.636,437,667
 
  F -
20
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 The
following is a summary of warrant activities during the year ended 31 December
2008:
 
 Number
      of
                        warrants
                      
                      
                      Weighted
                        average
                        exercise
                        price
                        $Outstanding
      at 1 January 2008
                      
                      
                      -
                      
                      
                      
                      -Granted
                      
                      
                      6,437,667
                      
                      
                      
                      1.40Exercised
                      
                      
                      -
                      
                      
                      
                      -Cancelled
                      
                      
                      -
                      
                      
                      
                      -Outstanding
      at 31 December 2008
                      
                      
                      6,437,667
                      
                      
                      
                      1.40Weighted
      average fair value of warrants granted during the period
                      
                      
                      
                      
                      
                      
                      0.62
 
 The
weighted average grant date fair value of warrants issued during the year ended
31 December 2008, amounted to $0.62 per warrant. The fair value of each warrant
granted was determined using the Black-Scholes option pricing model and the
following weighted average assumptions:
 
 2008
                    
                    
                    2007Risk
      free interest rate
                    
                    
                    2.02
                    %
                    
                    
                    -Expected
      life
                    
                    1
      year
                    
                    
                    
                    -Annualized
      volatility
                    
                    
                    120.80
                    %
                    
                    
                    -Expected
      dividends
                    
                    
                    -
                    
                    
                    
                    -
 
 Stock
Options
 
 The following incentive stock options
were outstanding at 31 December 2008:
 
 Exercise
                            price
                            $
                          
                          
                          Number
                            of
      options
                          
                          
                          Remaining
                            contractual
      life (years)Options
                          
                          
                          1.05
                          
                          
                          
                          1,550,000
                          
                          
                          
                          9.86Options
                          
                          
                          1.00
                          
                          
                          
                          3,285,000
                          
                          
                          
                          9.104,835,000
 
  F -
21
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 The
following is a summary of stock based compensation activities during the year
ended 31 December 2008:
 
 Number
      of
                        shares
                      
                      
                      Weighted
                        average
                        exercise
                        price
                        $$Outstanding
      at 1 January 2008
                      
                      
                      3,200,000
                      
                      
                      
                      0.30Granted
                      
                      
                      8,430,000
                      
                      
                      
                      1.01Exercised
                      
                      
                      -Cancelled
                      
                      
                      (6,795,000
                      )
                      
                      
                      0.67Outstanding
      at 31 December 2008
                      
                      
                      4,835,000
                      
                      
                      
                      1.02Weighted
      average fair value of options granted during the period
                      
                      
                      
                      
                      
                      
                      0.90
 
 13.
              Stock-Based
      Compensation
 
 During
the year ended 31 December 2008, the Company granted 8,430,000 stock options (31
December 2007 – 3,200,000) entitling the holders to purchase up to 6,880,000
common shares of the Company for proceeds of $1.00 per common share expiring 4
February 2018 and 1,550,000 common shares of the Company for proceeds of $1.05
per common share expiring 10 November 2018. A total of 3,595,000 of these stock
options were cancelled during the year ended 31 December 2008.
 
 A total
of 1,930,000 of these stock options vested on 4 August 2008.  A total
of 2,905,000 of these stock options vest on the following dates:
 
 Vesting
      Date
                    
                    Number
      of options4
      February 2009
                    
                    
                    1,355,00010
      May 2009
                    
                    
                    775,00010
      November 2009
                    
                    
                    775,0002,905,000
 
 The total
estimated fair value of the 8,430,000 stock options granted during the year
ended 31 December 2008 was $7,587,000 ($0.90 per option).  During the
year ended 31 December 2008, stock-based compensation of $2,033,607 (31 December
2007 - $625,035) has been recorded in the consolidated statement of operations
with a corresponding amount recorded as contributed surplus in stockholders’
equity.
 
 The fair
value of each option was estimated on the date of grant using Black-Scholes
option-pricing model. The assumptions about stock-price volatility have been
based exclusively on the implied volatilities of publicly traded options to buy
the Company’s stock with contractual terms closest to the expected life of
options granted to employees, directors or consultants applying the guidance
provided by SAB 107.
  F -
22
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 The
following assumptions were used for the Black-Scholes valuation of stock options
granted:
 
 2008
                    
                    
                    2007Risk
      free interest rate
                    
                    
                    3.65
                    %
                    
                    
                    4.87
                    %Expected
      life
                    
                    10
      years
                    
                    
                    10
      yearsAnnualized
      volatility
                    
                    
                    149
                    %
                    
                    
                    73
                    %Expected
      dividends
                    
                    
                    -
                    
                    
                    
                    -
 
 14.
              Income Taxes
 
 The
Company has losses carried forward for income tax purposes to 31 December
2008.  There are no current or deferred tax expenses for the year
ended 31 December 2008 due to the Company’s loss position. The Company has fully
reserved for any benefits of these losses.  The deferred tax
consequences of temporary differences in reporting items for consolidated
financial statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company’s ability to generate taxable
income within the net operating loss carryforward period.  Management
has considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes.
 
 The
provision for refundable federal income tax consists of the
following:
 
 For
      the
                        year
      ended
                        31
                        December
                        2008
                        $
                      
                      
                      For
      the
                        year
      ended
                        31
                        December
                        2007Deferred
      tax asset attributable to:Current
      operations
                      
                      
                      1,808,240
                      
                      
                      
                      414,365Amortization
                      
                      
                      (13,765
                      )
                      
                      
                      (10,914
                      )Contributions
      to capital by related party – expenses
                      
                      
                      -
                      
                      
                      
                      (204
                      )Stock
      based compensation
                      
                      
                      (691,426
                      )
                      
                      
                      (212,512
                      )Provision
      for potential legal claims
                      
                      
                      (68,000
                      )
                      
                      
                      -Less:
      Change in valuation allowance
                      
                      
                      (1,035,049
                      )
                      
                      
                      (190,735
                      )Net
      refundable amount
                      
                      
                      -
                      
                      
                      
                      -
 
  F -
23
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 The
composition of the Company’s deferred tax assets as at 31 December 2008and 31 December 2007 is as
follows:
 
 As
      at 31
                        December
                        2008
                        $
                      
                      
                      As
      at 31
                        December
                        2007
                        $Net
      income tax operating loss carryforward
                      
                      
                      (3,799,141
                      )
                      
                      
                      (768,293
                      )Statutory
      federal income tax rate
                      
                      
                      34.15
                      %
                      
                      
                      34.00
                      %Effective
      income tax rate
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %Deferred
      tax assetsTax
      loss carryforward
                      
                      
                      1,296,269
                      
                      
                      
                      261,220Less:
      Valuation allowance
                      
                      
                      (1,296,269
                      )
                      
                      
                      (261,220
                      )Net
      deferred tax asset
                      
                      
                      -
                      
                      
                      
                      -
 
 The
potential income tax benefit of these losses has been offset by a full valuation
allowance.
 
 As at 31
December 2008, the Company has an unused net operating loss carryforward balance
of approximately $3,799,141 that is available to offset future taxable
income.  This unused net operating loss carryforward balance for
income tax purposes expires between the years 2008 to 2028.
 
 15.
              Supplemental
      Disclosures with Respect to Cash
Flows
 
 For
      the
                        period
      from
                        the
      date of
                        inception
      on
                        6
      March
                        2000
      to 31
                        December
                        2008
                        (Unaudited)
                        $
                      
                      
                      For
      the
                        year
                        ended
      31
                        December
                        2008
                        $
                      
                      
                      For
      the
                        year
                        ended
      31
                        December
                        2007
                        $
                      
                      
                      For
      the
                        year
                        ended
      31
                        December
                        2006
                        $Cash
      paid during the year for interest
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Cash
      paid during the year for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
 
 During
the year ended 31 December 2008, the Company issued 500,000 common shares valued
at $0.70 per share in pursuant to the Atena Gold Project assignment agreement
(Notes 7 and 12).
 
 During
the year ended 31 December 2008, the Company issued 2,000,000 common shares
valued at $1.01 per share in pursuant to the Peruvian Gold Sands assignment
agreement (Notes 7 and 12).
  F -
24
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 During
the year ended 31 December 2008, the Company issued 300,000 common shares valued
at $0.70 per share pursuant to the Cerro Amarillo assignment agreement (Notes 7
and 12).
 
 During the year ended 31 December
2008, the Company issued 70,645 common shares valued at $49,252 and 70,645
warrants valued at $25,253 for agent services rendered (Note 12).
 
 During
the year ended 31 December 2008, the Company issued 1,000,000 common shares
valued at $1.59 per share pursuant to the Atena Gold Project assignment
agreement (Notes 7 and 12).
 
 During
the year ended 31 December 2008, the Company issued 350,511 agent compensation
warrants valued at $237,293 for agent services rendered (Note 12).
 
 During
the year ended 31 December 2008, director and shareholder of the Company made
contributions to capital for management fees and rent of $Nil (31 December 2007
- $Nil, cumulative - $12,000) and $Nil (31 December 2007 - $600, cumulative -
$3,000) respectively.  This amount has been recorded as an increase in
expenditures and an increase in additional paid-in capital (Note
11).
 
 By
agreements effective 18 January 2008, the Company assigned all of its rights,
title and interest in the Tombaugh Lease with a book value of $481,504 to a
purchaser in consideration for the purchaser assuming the Company’s outstanding
payment obligations of $788,619 related to its convertible debentures. The
Company recorded a gain of $307,115 upon completion of the transaction (Notes 3
and 9).
 
 During
the year ended 31 December 2008, the Company issued $Nil common shares (31
December 2007 – 1,145,300) for convertible debentures of $Nil (31 December 2007
- $22,906) (Note 9).
 
 During
the period ended 31 December 2008 the Company accrued interest of $Nil on
convertible debentures (Notes 7 and 9).
 
 During
the year ended 31 December 2007 the Company accrued interest of $74,770 on
convertible debentures (Notes 7 and 9).
 
 During
the year ended 31 December 2006 the Company accrued interest of $51,280 on
convertible debentures (Notes 7 and 9).
 
 During
the period ended 31 December 2005 the Company accrued interest of $475 on
convertible debentures (Notes 7 and 9).
 
 During
the year ended 31 December 2008, the Company issued $Nil common shares (31
December 2007 – 1,145,300) for convertible debentures of $Nil (31 December 2007
- $22,906) (Note 9).
 
 16.
              Commitments
 
 The Company is subject to certain
commitments related to its mineral property interest (Note 7).
 
  F -
25
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2008
 
 17.
              Subsequent
      Event
 
 Subsequent
to 31 December 2008, a total of 75,000 stock options exercisable at a price of
$1.00 per common share expired.
 
 18.
              Contingency
 
 In
January 2008, a contractor of the Company was critically injured in an
automobile accident while working for the Company in the area referred to as the
Atena Project located in northwestern Argentina.  The contractor’s
family has filed a claim in the Argentina court system seeking monetary damages
from the driver of the automobile, who is considered an employee under Argentina
labor law.  Although the Company has not been named as a party in this
action, the Company anticipates that the Company may be named as a defendant in
this action.  The Company has recorded a provision for potential legal
claims of $200,000 in the financial statements (Note 8).
 
 
   F -
26
 Table of Contents
  Signatures
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized, this 16th day of
March, 2009.
  CONSTITUTION
MINING CORP., a Nevada
corporation
 By:           /s/Willem
Fuchter
 Willem
Fuchter President
and Chief Executive Officer
  Each
person whose signature appears below authorizes Willem Fuchter to execute in the
name of each such person who is then an officer or director of the registrant,
and to file, any amendments to this Annual Report on Form 10-K necessary or
advisable to enable the registrant to comply with the Securities Exchange Act of
1934 and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in such
Report as such attorney-in-fact may deem appropriate.
  Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
  Signature
      and Title
                              
                              Date/s/
      Willem
      Fuchter
                              
                              March
      16, 2009Willem
      Fuchter, Director, President and Chief Executive Officer/s/
      Michael
      Stocker
                              
                              March
      16, 2009Michael
      Stocker, Director and Chairman of the Board/s/
      Alois
      Wiget
                              
                              March
      16, 2009Alois
      Wiget, Director/s/
      Duncan
      Large
                              
                              March
      16, 2009Duncan
      Large, Director/s/
      Gary
      Artmont
                              
                              March
      16, 2009Gary
      Artmont, Director/s/
      Hernan
      Zaballa
                              
                              March
      16, 2009Hernan
      Zaballa, Director/s/
      Patrick
      Gorman
                              
                              March
      16, 2009Patrick
      Gorman, Director/s/
      Peter
      Wiget
                              
                              March
      16, 2009Peter
      Wiget, Chief Financial Officer, Secretary, Treasurer
                                and
      Principal Accounting Officer
  - 53
-
 Table of Contents
  CONSTITUTION MINING
CORP.
  EXHIBIT INDEX
 TO
 2008 ANNUAL REPORT ON
FORM 10-K
 
 Exhibit
                      Number
                    Description
                    Incorporated by Reference
    to:
                    Filed
                      Herewith3.1
                    Articles
      of Incorporation
                    Exhibit
      3.1 to the Company’s Form 10 Registration Statement (SEC File
      No. 000-49725)3.2
                    Articles
      of Merger effective March 9, 2007
                    Exhibit
      3.2 to the Company’s Annual Report on  Form 10-KSB for the
      fiscal year ended December 31, 2006.3.3
                    Articles
      of Merger effective November 14, 2007
                    Exhibit
      3.3 to the Company’s Annual Report on  Form 10-KSB for the
      fiscal year ended December 31, 2007.3.2
                    Amended
      and Restated By-laws of the Company.
                    Exhibit
      3.1 to the Company’s Current Report on Form 8-K filed on March 4,
      2008.3.3
                    Audit
      Committee Charter, dated September 16, 2008.
                    Exhibit
      99.1 to the Company’s Current Report on Form 8-K filed on September 17,
      2008..3.4
                    Compensation
      Committee Charter, dated September 16, 2008
                    Exhibit
      99.2 to the Company’s Current Report on Form 8-K filed on September 17,
      2008.3.5
                    Nominating
      and Corporate Governance Committee Charter dated September 16,
      2008.
                    Exhibit
      99.3 to the Company’s Current Report on Form 8-K filed on September 17,
      2008.3.6
                    Technical
      Committee Charter dated September 16, 2008.
                    Exhibit
      99.4 to the Company’s Current Report on Form 8-K filed on September 17,
      2008.3.7
                    Environmental
      Health and Safety Committee Charter dated September 16,
    2008.
                    Exhibit
      99.5 to the Company’s Current Report on Form 8-K filed on September 17,
      2008.10.1
                    2007 Stock Incentive Plan, as
Amended.
                    
                    X10.2
                    Services Contract, dated October 15, 2008, between St.
      Lawrence Alluvial Services and Logistics Corp., its wholly-owned
      subsidiary Logistica y Servicios Aluviales San Lorenzo SAC, and
      Constitution Mining Corp.
                    
                    X10.3
                    Assignment
      Agreement, dated effective December 12, 2007, between Proyectos Mineros
      S.A. and Constitution Mining Corp. regarding Atena Gold
      Property.
                    Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed December 18,
      2007.10.4
                    Assignment
      Agreement, dated effective January 8, 2008, between Proyectos Mineros S.A.
      and Constitution Mining Corp. regarding Cerro Amarillo
      Property.
                    Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed January 10,
      2008.10.5
                    Assignment
      and Assumption of Lease and Debt Agreement, dated effective January 18,
      2008.
                    Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed January 24,
      2008.
  
 - 54
-
 Table of Contents
  
 Exhibit
                      Number
                    Description
                    Incorporated by Reference
    to:
                    Filed
                      Herewith10.6
                    Assignment
      Agreement, dated effective March 17, 2008, between Proyectos Mineros S.A.
      and Constitution Mining Corp., regarding the Amira, Amira Norte and
      Esparta II Properties.
                    Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed March 21,
      2008.10.7
                    Mineral
      Right Option Agreement, dated September 29, 2008, between Temasek
      Investments Inc. and Constitution Mining Corp.
                    Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed September 29,
      200814.1
                    Code of Ethics and Code of Conduct.
                    
                    X21.1
                    Subsidiaries of Constitution Mining
    Corp.
                    
                    X24.1
                    Power of Attorney.
                    
                    X31.1
                    Certificate of Willem Fuchter, Chief Executive Officer,
      pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.
                    
                    X31.2
                    Certificate of Peter Wiget, Chief Financial Officer,
      pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.
                    
                    X32.1
                    Certificate of Willem Fuchter, Chief Executive Officer,
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
                    
                    X32.2
                    Certificate of Peter Wiget, Chief Financial Officer,
      pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.
                    
                    X
 ___________
 
 
 
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